Lejilex, a digital asset company, along with the Crypto Freedom Alliance of Texas (CFAT), has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in a Texas court, challenging the SEC’s authority to regulate digital assets.

The suit, filed on Feb. 21, contends that the SEC has overstepped its jurisdiction by treating nearly all digital asset transactions as investment contracts under federal securities laws.

The lawsuit argues that the SEC has not been granted explicit authority by Congress to regulate digital assets and that the agency’s enforcement actions have been based on an overly broad interpretation of its powers.

Lejilex, which plans to launch a new digital asset trading platform called Legit.Exchange, fears potential SEC enforcement actions based on the regulator’s recent stance. CFAT, advocating for responsible crypto policy development in Texas, claims the SEC’s current approach hinders other authorities from properly regulating digital assets.

The complaint, spanning 57 pages, criticizes the SEC for not proposing any regulations for public comment that would clarify its regulatory domain over digital assets.

The plaintiffs are seeking a court ruling to confirm that secondary-market sales of digital assets facilitated by Legit.Exchange does not constitute securities sales. They also want the court to declare that Legit.Exchange will not operate as an unregistered securities exchange, broker, or clearing agency.