The Crypto Freedom Alliance of Texas (CFAT) and digital asset company Lejilex have taken legal action against the United States Securities and Exchange Commission (SEC), urging the court to determine the status of digital assets sold on the secondary market.
CFAT and Lejilex filed a lawsuit against the SEC in the Northern Texas District Court in Fort Worth on Feb. 21. Lejilex, led by co-founder Mike Wawszczak, who is an attorney and general counsel of Alliance DAO, plans to launch a crypto exchange called Legit.Exchange.
The lawsuit accuses the SEC of one count, citing the Declaratory Judgment Act and a 2007 case as a precedent. The plaintiffs are seeking several rulings from the court, including:
Additionally, they request that the court declare Legit.Exchange as not being an unregistered securities exchange and confirm that Lejilex will not be an unregistered broker or clearing agency by operating the exchange.
The plaintiffs argue that “the SEC’s recent enforcement actions adopt the new stance that nearly all digital asset transactions involve ‘investment contracts’ under the federal securities laws.”
They continue, “This stance poses a threat to law-abiding participants in the digital asset industry, as they face an imminent risk of being targeted by SEC enforcement actions for failing to comply with the SEC’s exaggerated understanding of its own authority.” The complaint further states:
Lejilex describes Legit.Exchange as a noncustodial digital asset trading platform that utilizes smart contracts to enable users to trade with one another. Users remain anonymous to each other, while Lejilex oversees the assets available for trading and undertakes verification functions in exchange for a fee. However, it does not hold custody of user assets. The company plans to launch Legit.Exchange by the end of the year, as stated on its website.
According to its website, Lejilex was established in 2023, and its presence on X (formerly Twitter) dates back to September. CFAT was also founded in September. Other supporters of the nonprofit organization include a16z crypto, Coinbase, Ledger, Bain Capital Crypto, Blockchain Capital, and Paradigm.
The lawsuit extensively discusses the Howey test and references the Wahi case, as well as SEC actions against LBRY, Binance, and various others.
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