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Digital asset company, Lejilex, and the Crypto Freedom Alliance of Texas (CFAT) filed a lawsuit against the United States Securities and Exchange Commission (SEC) on February 21 in the Northern Texas District Court in Fort Worth, alleging the regulator has "overstepped" its authority on digital assets.
In a report published by Cointelegraph, it was revealed that Lejilex, and CFAT sued the SEC, seeking the court to rule on the status of the digital assets reportedly sold on the secondary market.
The suit comes as Lejilex plans to launch its crypto exchange called “Legit.Exchange" by the end of the year.
Lejilex's Legit.Exchange Does Not Qualify as Sales of Securities
According to the lawsuit, the SEC is facing one count, invoking the Declaratory Judgment Act and citing a pivotal 2007 case. The plaintiffs are seeking for the court to rule that the secondary-market transactions involving digital assets like what Lejilex intends to facilitate through the crypto exchange “Legit.Exchange” do not qualify as sales of securities as defined by the provisions of the Exchange Act of 1934, as well as Securities Act of 1933.
In addition, they contended that Legit.Exchange is not an unregistered exchange, adding that Lejilex would not be an unregistered clearing agency or unregistered broker by the operating exchange.
SEC's Position Threatens Law-Abiding Participants in the Digital Asset Industry
The plaintiffs also claimed that the SEC’s recent enforcement actions embrace the “novel position that nearly all digital asset transactions involve 'investment contracts' under the federal securities laws.”
They argued “that SEC's position threatens law-abiding participants in the digital asset industry with an imminent risk of being subjected to SEC enforcement actions for failing to comply with the SEC’s exaggerated understanding of its own authority," Coingape reported.
Moreover, the complaint went on to claim that despite the multiple pleas submitted by the industry participants, the SEC has opted not to release any regulations that would set forth its new position, requiring the agency to “subject its reasoning to the crucible of notice-and-comment rulemaking.”
Lejilex, founded in 2003, unveiled its plan for Legit.Exchange, claiming that it is a non-custodial digital asset trading platform that employs smart contracts to facilitate anonymous user transactions, allowing them to trade with each other.
The platform announced that it would control and oversee asset verification for a fee but made it clear it would not retain custody over user assets.
Photo: Kanchanara/Unsplash
