Bittrex Wants Court to Toss Out SEC Lawsuit Against it

Crypto exchange Bittrex has taken a significant step in its legal battle with the U.S. Securities and Exchange Commission (SEC) by filing a motion to dismiss the lawsuit brought against it.

In the recent court filing, Bittrex contends that the SEC lacks the authority to regulate crypto assets as securities without specific authorization from Congress. This argument challenges the SEC’s interpretation of current securities laws and aims to develop a clearer regulatory framework that aligns with the unique nature of digital assets.

SEC’s Allegations

In April, the SEC accused Bittrex and its co-founder, William Shihara, of operating an unregistered national securities exchange. According to the complaint, Bittrex facilitated the trading of digital assets that met the criteria of securities under U.S. federal securities laws, without registering as an exchange with the SEC.  

Additionally, the SEC also charged Bittrex Global GmbH, Bittrex’s foreign affiliate, for failing to register as a national securities exchange.

In response to the SEC complaint, Bittrex decided to close its U.S. operations, citing the country’s difficult regulatory and economic environment. However, Bittrex vowed to contest the SEC’s claims instead of settling.

Bittrex Takes Precedence from Coinbase

In its motion to dismiss, Bittrex has drawn inspiration from Coinbase’s playbook, closely mirroring the arguments made by the larger crypto exchange. This alignment suggests a strategic decision by Bittrex to leverage the strength of Coinbase’s legal framework and build a unified defense against the SEC’s lawsuit.

Bittrex’s legal team, similar to Coinbase’s, identifies what they perceive as deficiencies in the SEC’s claims related to the trading of investment contracts. While both defendants admit that the original sale of certain crypto assets may be classified as securities contracts, they argue that the same classification does not apply to assets exchanged on secondary markets. 

Accordingly, they assert that once an asset has been launched and is actively traded on secondary markets, it should no longer be treated as a security, but rather as a commodity or other digital asset class.

Furthermore, Bittrex argues that the SEC failed to provide fair notice that its actions were prohibited, highlighting a common defense strategy among crypto defendants contesting SEC claims.