Lejilex and Texas Crypto Alliance Challenge SEC's Digital Asset Policies in Court
Summary:
The Texas Crypto Freedom Alliance and digital asset firm Lejilex have initiated legal action against the U.S. Securities and Exchange Commission (SEC). They argue that the SEC's approach to digital asset transactions is too broadly interpreted, leading to unjustified prosecutions. The plaintiffs' suit requests clear definitions of the details of how the SEC sees their responsibilities within the industry. Lejilex is also preparing to launch a decentralized crypto trading platform, Legit.Exchange, by the end of the year.
The Texas Crypto Freedom Alliance (TCFA) and digital asset firm Lejilex have lodged a legal action against the U.S. Securities and Exchange Commission (SEC), seeking a court decision on the status of digital assets traded in secondary markets. The lawsuit, logged with the Northern Texas District Federal Court in Fort Worth on February 21, was initiated by TCFA and Lejilex, the latter currently preparing to introduce a crypto trading platform named Legit.Exchange. Mike Wawszczak, co-founder of Lejilex, who is also a lawyer and the legal advisor of Alliance DAO, as stated on his LinkedIn account.
Citing the Declaratory Judgment Act and a precedent case from 2007, the lawsuit registers a single claim against the SEC. The litigants request the court to rule on several points, including one that asserts the secondary-market sales of digital assets facilitated by Lejilex through the Legit.Exchange are not securities sales as outlined in the Exchange Act of 1934 and Securities Act of 1933. They also plead with the court to declare that Legit.Exchange is not operating as an unregistered securities exchange, and, in operating the exchange, Lejilex will not be functioning as an unregistered broker or unregistered clearing agency.
The plaintiffs argue that the SEC's recent enforcement activities highlight a new stavce that essentially all transactions involving digital assets are 'investment contracts' under federal securities laws. This stance, they state, puts individuals lawfully participating in the digital asset industry at risk of facing SEC enforcement prosecutions due to the SEC's overblown notion of its own authority. In spite of numerous appeals from players in the sector, the litigants emphasize that the SEC has elected not to issue clear rules laying out its new stance, which they argue would command the SEC to put its logic through the rigors of a notice-and-comment policymaking process.
Legit.Exchange has been billed by Lejilex as a decentralized digital asset exchange platform that employs smart contracts to let users transact with each other while remaining anonymous. Lejilex would have dominion over the digital assets that could be traded on the exchange and would oversee functions like validation for a fee, while not having control over user assets. The company has announced on its webpage that they aim to launch Legit.Exchange by this year's end.
Founded in 2023, according to Lejilex’s website, it first engaged on X (previously known as Twitter) in September. TCFA was also established in the same month. Other entities that give financial support to the non-profit include a16z crypto, Coinbase, Ledger, Bain Capital Crypto, Blockchain Capital, and Paradigm.
Notably, the lawsuit delved into the Howey Test extensively, and also referenced the Wahi lawsuit and actions by the SEC against LBRY,Binance, and others.
Published At
2/21/2024 11:32:58 PM
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