Bittrex Challenges SEC Authority in Crypto Lawsuit, Seeks Removal

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Cryptocurrency exchange Bittrex has filed a motion to dismiss in its legal dispute with the United States Securities and Exchange Commission (SEC).

In its recent court filing, Bittrex argues that the SEC has no authority to regulate cryptocurrencies as securities unless explicitly authorized by Congress. This assertion challenges the SEC’s interpretation of existing securities regulations and seeks to establish a more defined regulatory framework for digital assets.

In its motion to dismiss, Bittrex took a similar approach to Coinbase, closely aligning its arguments with those advanced by the largest cryptocurrency exchange. This alignment indicates a strategic move by Bittrex to capitalize on the strong legal framework established by Coinbase and build a unified defense against the SEC lawsuit.

Bittrex’s motion to reject (screenshot). Source: Court Listener

Like Coinbase, Bittrex’s legal team identifies what it perceives to be flaws in the SEC’s allegations regarding the trading of investment contracts. While both defendants acknowledge that the initial sale of certain crypto assets could qualify as securities contracts, they argue that the same classification does not extend to assets traded in secondary markets.

They argue that once an asset is launched and actively traded in secondary markets, it should no longer be considered a security but rather classified as a commodity or another digital asset class.

Additionally, Bittrex argues that the SEC failed to adequately communicate that its actions were prohibited, emphasizing a defense strategy commonly employed by cyber defendants who dispute SEC allegations.

Related: Bittrex Withdrawals Set to Resume After Bankruptcy Court Green Light

In April, the SEC accused Bittrex and its co-founder, William Shihara, of operating an unregistered national securities exchange. Pursuant to the complaint, Bittrex permitted the trading of digital assets that met the securities criteria set forth in U.S. federal securities laws without obtaining registration with the SEC as an exchange.

In the same complaint, the SEC also accused Bittrex Global, the foreign subsidiary of Bittrex, of failing to register as a national securities exchange.

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