Texas Crypto Company Lejilex and CFAT Sue SEC Over Regulatory Overreach

A Texas-based crypto company, Lejilex, in partnership with the Crypto Freedom Alliance of Texas (CFAT), has filed a lawsuit against the US Securities and Exchange Commission (SEC), alleging regulatory overreach and seeking clarity on the classification of digital assets. The lawsuit, filed in a federal court in Fort Worth, challenges the SEC’s jurisdiction over the cryptocurrency industry, citing concerns about excessive regulation hindering innovation.

Lejilex and CFAT argue that the SEC’s broad assertion of jurisdiction lacks a clear statutory mandate, leading to uncertainty for crypto startups like Lejilex in listing digital assets. They seek legal clarification to ensure compliance with securities laws while advocating for a more conducive regulatory environment.

The lawsuit aims to contest the SEC’s characterization of digital assets as investment contracts and advocates for the application of the “major questions doctrine” to nullify agency actions with significant economic and political implications without explicit congressional authorization.

CFAT, comprising industry players like Coinbase and Andreessen Horowitz’s a16z crypto fund, joins the lawsuit to block potential SEC enforcement actions against its members and advocate for sensible policies in Texas. The group highlights challenges in navigating regulatory compliance amid the SEC’s oversight.

Lejilex and CFAT’s lawsuit against the SEC underscores ongoing tensions between regulatory authorities and the crypto industry. As the legal battle unfolds, stakeholders will closely monitor the outcome, which could have significant implications for regulatory clarity and innovation in the digital asset space. The lawsuit represents a concerted effort by industry players to challenge regulatory overreach and advocate for a more transparent and conducive regulatory framework.

Over 300 experts in technology, artificial intelligence (AI), digital ethics, and child safety have joined forces to urge governments to take immediate action against deepfakes. The open letter, titled “Disrupting the Deepfake Supply Chain,” highlights the urgent need to address the proliferation of deepfakes and proposes three key courses of action.

The letter calls for governments to fully criminalize deepfake child pornography, even when involving fictional children, to combat the exploitation of minors through manipulated media. It advocates for criminal penalties for individuals who knowingly create or facilitate the spread of harmful deepfakes. Additionally, it proposes requirements for software developers and distributors to ensure their products do not contribute to the creation of harmful deepfakes, with penalties for non-compliance.

Signatories of the letter, including notable figures like Andrew Yang and Steven Pinker, emphasize the need for global cooperation in addressing the deepfake threat. They urge governments and policymakers worldwide to prioritize legislative action to mitigate the harmful effects of deepfakes on individuals, communities, and democratic processes.

Joy Buolamwini, founder of the Algorithmic Justice League, stresses the need for “biometric rights” to protect individuals from algorithmic abuse, particularly marginalized groups disproportionately affected by deepfake exploitation. She emphasizes the importance of holding perpetrators accountable for egregious abuses of AI.

While current legislation in the U.S. lacks comprehensive measures targeting deepfakes, recent events, including the circulation of viral deepfakes involving public figures like Taylor Swift and President Joe Biden, have prompted lawmakers to push for legislative action. The U.S. Federal Trade Commission has proposed updates to regulations to address AI impersonation for consumer protection purposes. As deepfake technology continues to evolve, swift and decisive measures are necessary to protect individuals, uphold democratic processes, and ensure accountability in the digital age.