Crypto.com, a major player in the cryptocurrency marketplace and a high-profile sponsor in global sports, has launched a legal battle against the U.S. Securities and Exchange Commission (SEC). The lawsuit represents a broader conflict between the cryptocurrency industry and regulatory agencies, with significant implications for both the crypto world and the sports industry.
The Legal Battle: Crypto.com vs. SEC
The core of Crypto.com’s lawsuit against the SEC lies in the agency’s efforts to classify the company’s tokens as securities, subjecting them to strict regulation under U.S. securities laws. The company received a Wells notice from the SEC, signaling that the agency is nearing formal charges of securities violations. In response, Crypto.com claims the SEC is overstepping its authority, using legal actions as a substitute for rulemaking. The company argues that its tokens do not meet the definition of securities under federal law and that the SEC is unlawfully imposing regulations without proper legislative backing.
On its website, Crypto.com framed the lawsuit as a defense of the broader cryptocurrency industry, stating: “We are [suing] to protect the future of the crypto industry in the U.S.” The company’s legal stance is that the SEC’s regulatory push is not grounded in proper lawmaking processes, particularly pointing out that the term “Crypto Asset Security” has no foundation in existing statutes. Crypto.com is demanding a judicial declaration that its tokens are not securities and an injunction preventing the SEC from enforcing its interpretation of the law.
Sports Marketing: Crypto’s Big Bet
The legal challenge comes at a critical time for Crypto.com, which has invested heavily in sports marketing to grow its brand. Over the past few years, the company has committed more than $1 billion to sponsorship deals across various sports leagues and teams. One of its most prominent deals is with the UFC, where Crypto.com signed a 10-year, $175 million contract to become the MMA giant’s first fight kit sponsor. The company’s logo is displayed on fighters’ gear, giving Crypto.com massive visibility in the sports world.
In 2021, Crypto.com also made headlines by securing a $700 million, 20-year deal to rename the iconic Staples Center, home to the Los Angeles Lakers and Kings, as Crypto.com Arena. This move not only solidified the company’s presence in mainstream culture but also demonstrated its willingness to spend big to reach a wider, sports-loving audience. Additionally, Crypto.com has partnered with organizations like Formula 1, UEFA, and Italy’s Serie A, further embedding itself in global sports.
However, the SEC’s investigation, and the potential charges that may follow, cast a shadow over these lucrative deals. The cryptocurrency industry’s regulatory uncertainty was always a risk for sports organizations entering into partnerships with crypto companies. Crypto.com’s aggressive marketing strategy has put it in the spotlight, but the legal battle with the SEC could change the dynamics of these relationships.
Crypto’s Tumultuous History with Sports Sponsorships
Crypto.com’s legal issues with the SEC come in the wake of several high-profile crypto collapses that affected sports sponsorships. In 2021, FTX, another cryptocurrency marketplace, entered into a $135 million deal to sponsor the Miami Heat’s home arena. Less than two years later, FTX declared bankruptcy, leaving the sponsorship in limbo. Similarly, Voyager Digital, a crypto partner of the National Women’s Soccer League (NWSL), went bankrupt, leaving the league scrambling for a new sponsor.
These events highlight the volatility of the cryptocurrency industry and the potential risks for sports organizations that partner with crypto companies. Crypto.com’s legal battle with the SEC could force the company to rethink its aggressive sports sponsorship strategy, particularly if the lawsuit results in tighter regulatory scrutiny and financial penalties.
The Legal Landscape: Will Crypto.com Prevail?
Crypto.com’s lawsuit against the SEC is grounded in claims that the agency has exceeded its regulatory authority by classifying the company’s tokens as securities. The company argues that the SEC has failed to follow proper rule-making procedures under the Administrative Procedure Act (APA), a federal law that governs how agencies develop regulations.
The APA requires federal agencies like the SEC to act within the boundaries set by Congress, and Crypto.com claims the agency has violated these guidelines by overreaching its jurisdiction. However, challenging the SEC in court is no easy task. Federal agencies are often given deference by the courts because they are presumed to have expertise in their areas of regulation. To succeed, Crypto.com must demonstrate that the SEC has acted arbitrarily or capriciously—an uphill battle in most cases.
That said, recent Supreme Court rulings have taken a more skeptical view of federal agencies’ authority, suggesting Crypto.com may have some legal momentum on its side. In particular, rulings in cases like Loper Bright Enterprises v. Raimondo and Jarkesy v. SEC have restricted agencies’ powers, raising questions about how much regulatory leeway the SEC will have in the future.
What’s Next for Crypto.com and the SEC?
The outcome of Crypto.com’s lawsuit could have far-reaching consequences for both the cryptocurrency and sports industries. If the courts side with Crypto.com, it could limit the SEC’s ability to regulate the crypto market, potentially giving companies more freedom to operate without fear of enforcement actions. This would be a win not just for Crypto.com but for the entire crypto ecosystem, which has long fought against what it sees as overly burdensome regulation.
However, if the SEC prevails, it could lead to more stringent regulations across the industry, increasing the cost of doing business for companies like Crypto.com. This could also impact the company’s sports sponsorships, as increased regulatory scrutiny could make long-term deals riskier and more expensive.
As the legal battle unfolds, the future of cryptocurrency regulation in the U.S. remains uncertain. But one thing is clear: the clash between Crypto.com and the SEC is about more than just tokens—it’s about the future of the digital economy and its place in the mainstream, including sports.
This legal conflict not only highlights the regulatory challenges the crypto industry faces but also underscores the potential ripple effects in sectors like sports, where cryptocurrency companies have invested heavily. As the lawsuit develops, the stakes are high for all parties involved.