Bittrex Challenges SEC’s Authority in Crypto Lawsuit

Bittrex Challenges SEC’s Authority in Crypto Lawsuit – Bittrex, a cryptocurrency exchange, has filed a motion to dismiss the legal dispute it has with the United States Securities and Exchange Commission (SEC). In its recent court filing, Bittrex contends that the SEC lacks the authority to regulate cryptocurrencies as securities unless explicitly granted by Congress. 

By making this claim, Bittrex challenges the SEC’s interpretation of current securities regulations and aims to establish a clearer regulatory framework that accommodates digital assets. Bittrex’s motion to dismiss follows a similar strategy to that of Coinbase, a larger cryptocurrency exchange. 

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Bittrex aligns its arguments closely with Coinbase’s, suggesting a strategic decision to leverage the strong legal framework established by Coinbase and present a unified defense against the SEC’s lawsuit. Similar to Coinbase, Bittrex’s legal team has identified what they perceive as deficiencies in the SEC’s allegations regarding the trading of investment contracts. 

While both defendants acknowledge that the initial sale of certain crypto assets could be classified as securities contracts, they argue that the same classification does not apply to assets traded on secondary markets. According to their argument, once an asset is launched and actively traded on secondary markets, it should be considered a commodity or another type of digital asset, rather than a security. 

Furthermore, Bittrex claims that the SEC did not sufficiently communicate that its actions were prohibited, employing a defense strategy commonly used by cryptocurrency defendants who challenge the SEC’s allegations. In April, the SEC filed charges against Bittrex and its co-founder, William Shihara, for operating an unregistered national securities exchange. 

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The complaint states that Bittrex facilitated the trading of digital assets that met the criteria for securities outlined in U.S. federal securities laws without obtaining SEC registration as an exchange. Additionally, in the same complaint, the SEC charged Bittrex Global, the foreign affiliate of Bittrex, with failing to register as a national securities exchange.

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