The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Cumberland DRW LLC, accusing the company of conducting unregistered crypto trading since March 2018. According to the SEC, Cumberland has been operating as an illegal dealer in crypto securities through its proprietary platform, Marea. This lawsuit adds to the growing regulatory scrutiny surrounding the classification of certain altcoins as securities, a position disputed by key players like Ripple and Crypto.com.

SEC Targets Cumberland, Labels Certain Altcoins as Securities

In its complaint, the SEC alleges that Cumberland has been functioning as an unregistered exchange and trading assets it classifies as securities. These include popular altcoins such as Polygon (POL), Solana (SOL), Cosmos (ATOM), Algorand (ALGO), and Filecoin (FIL). The SEC also claims that Cumberland encouraged investments in these assets by using research reports and email updates.

The SEC’s position is that Cumberland’s activities violate Section 15(a) of the Securities Exchange Act of 1934, as it traded crypto assets deemed to be securities without proper registration.

SEC’s Stance on Crypto Assets as Securities

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According to Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit (CACU), all securities dealers, including those in the crypto market, are required to register with the SEC. Despite the crypto industry’s argument that digital assets should be classified as commodities, the SEC maintains that many crypto assets meet the legal definition of securities. This case, filed in the Northern District of Illinois, is part of the SEC’s broader crackdown on the crypto sector.

The agency is seeking a permanent injunction, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

Ripple and Crypto.com Push Back Against SEC’s Classification

The lawsuit further highlights the growing tension between the SEC and key crypto industry players. Ripple, which has been engaged in a lengthy legal battle with the SEC, recently filed a cross-appeal challenging the classification of XRP as a security. Ripple CEO Brad Garlinghouse criticized the SEC’s enforcement action against Cumberland, calling for an end to what he described as regulatory overreach.

Additionally, Crypto.com has also filed a lawsuit against the SEC, accusing the agency of exceeding its authority. This move came after Crypto.com received a Wells notice from the SEC, signaling potential enforcement action. The platform argues that most cryptocurrencies are unfairly classified as securities and that the SEC is unlawfully expanding its reach.

This latest SEC lawsuit against Cumberland underscores the ongoing regulatory battle over the classification of altcoins as securities. With key industry players like Ripple and Crypto.com pushing back, the outcome of these legal challenges could shape the future of the crypto market in the U.S.

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