Lejilex, a Texas-based crypto startup, is locked in a legal battle with the United States Securities and Exchange Commission (SEC), accusing the agency of an overreach in its regulatory authority. The startup, which plans to launch a crypto exchange by the end of 2024, filed a brief in a Texas federal court on Oct. 3, seeking a preemptive ruling to ensure its business would not violate securities laws.
Regulatory “Land Grab” Claims
Lejilex is part of the Crypto Freedom Alliance of Texas and argues that it aims to facilitate crypto transactions, not sell securities. In its filing, the startup accused the SEC of overstepping its jurisdiction, calling its actions a “massive regulatory land grab.” Lejilex believes the SEC is attempting to broadly categorize crypto assets as securities, which the company says is an unjustified expansion of its power.
“The fact that the SEC perceives digital assets to be different is no justification for its massive regulatory land grab,” Lejilex stated in its brief.
The legal clash escalated as both Lejilex and the SEC submitted competing briefs for summary judgment. Lejilex is asking the court to declare that its planned exchange, which will list pre-existing tokens, will not violate U.S. securities laws. The SEC, however, claims the lawsuit seeks an overly broad ruling that cryptocurrencies cannot be classified as securities.
SEC Argues Against Preemptive Ruling
The SEC pushed back, arguing that Lejilex does not have standing for the lawsuit since no enforcement action has been taken against it yet. The SEC has also taken issue with what it sees as an attempt to force a ruling that would exempt all digital assets from being treated as securities.
Lejilex co-founder Mike Wawszczak expressed frustration over the legal wrangling, stating, “We wish we were launching our business instead of filing a lawsuit, but here we are.” In February, the company initially asked the court to rule that listing pre-existing tokens on its exchange would not violate securities regulations.
Industry Reaction and Broader Implications
Lejilex’s legal battle with the SEC is part of a broader conflict between crypto companies and regulators. Coinbase’s chief legal officer, Paul Grewal, weighed in on the case in an Oct. 4 X (formerly Twitter) post, criticizing the SEC for inconsistent arguments across different cases. He noted that the SEC had made conflicting claims about digital asset transactions in its case against Coinbase, where the agency alleged the exchange sold unregistered securities.
“This is our government acting in the name of all of us. Telling one judge one thing while telling another the opposite should not be tolerated. We deserve better,” Grewal remarked.
Ripple, another high-profile company in the crypto space, has also been entangled in legal disputes with the SEC. Ripple executives and their legal team criticized the SEC’s ongoing appeal following a 2023 ruling that secondary sales of XRP did not constitute securities transactions. Republican Senate candidate John Deaton added to the criticism, accusing the SEC of wasting taxpayer money in its pursuit of what he described as an “anti-crypto agenda.”
