According to a recent court filing, the U.S. subsidiary of Bittrex has requested the dismissal of the case filed against the exchange by the U.S. Securities and Exchange Commission (SEC). Attorneys for Bittrex argue that the SEC cannot regulate cryptocurrency assets as securities without approval from Congress.
SEC Lawsuit: Bittrex Seeks Dismissal, Citing Lack of Clarity in Token Securities Regulation
In mid-April 2023, Bittrex’s U.S. crypto exchange faced a lawsuit from the Securities and Exchange Commission (SEC) for allegedly operating an unregistered exchange, broker, and clearing agency. SEC Chair Gary Gensler stated that the securities watchdog was “holding Bittrex accountable for its noncompliance.” Two weeks later, Bittrex’s U.S.-based exchange filed for Chapter 11 bankruptcy protection. In the most recent court filing, Bittrex’s legal team is seeking the dismissal of the SEC case against the company.
The attorneys argue that the regulation of tokens as securities in the U.S. remains a “major question” that lacks definition and remains unanswered. Bittrex also contends that the SEC failed to provide sufficient notice regarding the alleged violations of securities laws. The attorneys representing the crypto exchange criticized the securities regulators for conducting a six-year investigation without identifying a single unlawfully listed crypto asset token until mid-April 2023. “Yet the Commission is still missing essential elements of its claims,” noted Bittrex in its request for dismissal.
The complaint offers three reasons for seeking dismissal. First, it highlights the unresolved question of whether tokens should be subject to securities regulations, as asserted by the SEC. Attorneys emphasize that this issue requires the attention of congressional leaders rather than being solely determined by the SEC or the court. Second, Bittrex emphasizes that the complaint fails to provide substantial evidence supporting the claim that any of the secondary-market transactions conducted on Bittrex’s platform involved securities.
Lastly, the attorneys contend that the SEC’s inadequate definition of the alleged misconduct has deprived Bittrex of proper notification regarding the claims made against it. Bittrex’s attempt to seek dismissal aligns with Coinbase’s 177-page argument, which asserts that the SEC’s enforcement actions violate due process and the constitutional separation of powers. The Bittrex dismissal request shares a similar sentiment with Coinbase’s argument, as it firmly believes that the SEC lacks the “clear congressional authorization” necessary to apply securities laws to tokens under the major questions doctrine.
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