Bittrex takes a stand against SEC as Coinbase enjoys institutional finance backing

• Bittrex has petitioned the court to dismiss the SEC's regulation of tokens as securities.
• The exchange has criticized the agency for overstepping its boundaries after allegations of registration failure.
• The move replicates what Coinbase had done days before BlackRock included the exchange in its spot BTC ETF filing.
• It threatens the financial regulator's authority, putting it under the foothold of congressional authorization.

Bittrex has followed on the heels of the Coinbase exchange to file a petition against the United States Securities and Exchange Commission. Like the former, Bittrex wants the court to dismiss allegations by the financial regulator claiming that Bittrex violated multiple securities by failing to register as a registered securities exchange.

Also Read: BlackRock chooses Coinbase for SSA despite the SEC's negative bias against the US-based exchange

Bittrex says the SEC is overstepping its mandate

Bittrex Exchange has sued the SEC, petitioning the court to dismiss the regulator's accusation of securities laws violation. Based on the filing, the exchange claims that the financial regulator is overstepping, citing a lack of "congressional authorization."

The move is a replica of what Coinbase did on June 29, slamming the SEC on charges that the regulator lacked jurisdiction over crypto assets on the exchange. Citing overreach and violation of due process, the US-based exchange noted key "regulatory gaps" and limitations on the agency's mandate in the digital assets space.

Bittrex vs. Coinbase, comparing exchanges' wars with the SEC

The narrative, which pans out as a mimic of what happened in the Coinbase vs. SEC case, is only differentiated because Coinbase is a larger cryptocurrency exchange by trading volume than Bittrex. The exchange does not enjoy the same status as the Coinbase exchange in the crypto market, with the latter boasting around 150 tokens while for former commands upward of 244 tokens on CoinMarketCap's list of spot exchanges. As such, while Coinbase's assertiveness earned the platform remarkable support, Bittrex may enjoy a different courtesy. Similarly, Coinbase's heft as the second-largest crypto exchange with an expansive trading volume bodes well for its case regarding market influence.  

Because collaborating with a prominent brand would help assuage the SEC to approve the ETF filing, the BlackRock asset manager listed Coinbase as its Surveillance Sharing Agreement (SSA). The influence of a significant partner is key, as corroborated by Nate Geraci of financial adviser ETF Store during his comments to the Financial Times. Nate had speculated that a partnership with the EDX Markets exchange launched last week would bode well for the application.

Fund management powerhouses such as Fidelity Investments, brokers Charles Schwab, and Citadel Securities back the EDX exchange, with only a few accredited members permitted to trade on it. This adds more credence to the thesis about an influential partner. 

Still, the stance threatens the position of the SEC, putting it under the foothold of congressional authorization. Whether the application for dismissal will go through remains unknown. However, it should not surprise that crypto assets will suffer the consequences of this move directly or indirectly.

Specifically, the entire scope of the SEC's mandate over crypto and the limitations of fair notice come into question for market participants. Noteworthy, a fair notice requires that the defendant adequately keeps the plaintiff informed of every detail. 

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