Bittrex challenges SEC's authority in crypto lawsuit, seeks dismissal

Bittrex, a cryptocurrency exchange, has made a notable move in its legal dispute with the United States Securities and Exchange Commission (SEC) by submitting a motion to dismiss the lawsuit filed against it.

In its recent court filing, Bittrex argues that the SEC does not possess the necessary authority to regulate cryptocurrencies as securities unless explicitly granted by Congress. This assertion challenges the SEC’s interpretation of existing securities regulations and seeks to establish a more defined regulatory framework that accommodates the distinct characteristics of digital assets.

In its motion to dismiss, Bittrex has adopted a similar approach to Coinbase, aligning its arguments closely with those made by the larger cryptocurrency exchange. This alignment indicates a strategic move by Bittrex to capitalize on the robust legal framework established by Coinbase and construct a unified defense against the SEC’s lawsuit.

Like Coinbase, Bittrex’s legal team identifies what they perceive as shortcomings 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 contend that the same classification does not extend to assets traded on secondary markets.

As a result, they argue that once an asset is launched and actively traded on secondary markets, it should no longer be considered a security, but rather categorized as a commodity or another class of digital asset.

Moreover, Bittrex contends that the SEC did not adequately communicate that its actions were prohibited, emphasizing a defense strategy commonly employed by crypto defendants who challenge the SEC’s allegations.

Related: Bittrex withdrawals set to resume after bankruptcy court gives green light

The SEC filed allegations against Bittrex and its co-founder, William Shihara, in April, for running an unregistered national securities exchange. As per the complaint, Bittrex enabled the trading of digital assets that met the securities criteria outlined in U.S. federal securities laws, without obtaining SEC registration as an exchange.

Additionally, Bittrex Global GmbH, the foreign affiliate of Bittrex, faced charges from the SEC for not registering as a national securities exchange. 

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