Bittrex Mirrors Coinbase, Requests SEC Lawsuit Dismissal
Cryptocurrency exchange Bittrex has taken a page out of Coinbase’s playbook by filing a motion to dismiss the charges brought against it by the U.S. Securities and Exchange Commission (SEC). In a move that echoes Coinbase’s recent actions, Bittrex accuses the SEC of overreach and argues that the crypto assets in question may not fall under the agency’s purview.
Different Lawsuit, Similar Motivation
While Bittrex is currently embroiled in bankruptcy procedures, the motion to dismiss pertains to a separate lawsuit filed after the company’s decision to exit the U.S. market. The exchange had been under investigation since 2017 and engaged in discussions with the SEC since 2022, which proved unfruitful. Subsequently, the SEC filed a Wells notice followed by a full-blown lawsuit against Bittrex for listing unregistered securities.
In its court filings, Bittrex argues that crypto assets should be classified as commodities rather than securities. The exchange asserts that although these assets may be considered securities when initially launched, their status changes once they are traded on secondary markets. Bittrex claims that tokens resemble commodities or property more closely than traditional investments targeted by securities laws.
“Tokens are not a new kind of security; they are different in kind from anything the Commission has ever considered a security. They bear far more resemblance to commodities or property than to the “investments” that were the focus of “Congress’ purpose in enacting the securities laws.”
Questioning the SEC’s Authority
Moreover, Bittrex’s legal team contends that even if the court were to rule that the crypto assets in question qualify as securities, the SEC lacks the authority to regulate them. The exchange argues that the U.S. Congress has not empowered the agency to oversee cryptocurrencies, highlighting the absence of a legal framework for the SEC in this regard. Bittrex’s legal counsel draws parallels between the SEC’s attempts to regulate crypto assets and the FDA’s control over tobacco or the EPA’s regulation of greenhouse gasses, characterizing it as government agency overreach.
In support of their case, Bittrex’s legal team points to a 2021 declaration by SEC Chairman Gary Gensler himself. Gensler acknowledged before Congress that the SEC does not possess a legal framework for cryptocurrencies. This admission further bolsters Bittrex’s argument that the SEC lacks the authority to regulate these assets.
The actions taken by Coinbase and Bittrex to seek dismissal of SEC lawsuits reflect the mounting frustration within the crypto industry regarding what is perceived as arbitrary regulatory attempts. Rather than engaging in good-faith efforts to bridge the gap between traditional securities regulations and the unique characteristics of cryptocurrencies, the SEC’s preference for lawsuits has left industry players feeling disheartened.
The success of Coinbase and Bittrex in their attempts to have the SEC lawsuits dismissed is still uncertain. However, these actions serve as powerful statements regarding the need for clear and comprehensive regulatory frameworks that recognize the distinctive nature of cryptocurrencies. As the crypto industry continues to evolve and gain mainstream adoption, it is essential for regulators and industry participants to engage in constructive dialogue to ensure a balanced and transparent regulatory environment.