The Daily: Crypto.com sues SEC after receiving a Wells notice, Scroll unveils token launch plans and more

Happy Tuesday! In today's newsletter, Crypto.com sues the SEC after receiving a Wells notice, Scroll unveils its token launch plans, Linea proposes its decentralization roadmap and more.

Meanwhile, a U.S. bankruptcy judge approved FTX's reorganization plan two years after the exchange's collapse.

Plus, get to know the candidates who could be named as Bitcoin creator Satoshi Nakamoto in tonight's HBO documentary at 9 p.m. ET.

Let's get started.

Crypto.com sues SEC after receiving a Wells notice

Crypto.com filed a lawsuit against the SEC on Tuesday, claiming the agency had overstepped its jurisdiction and left it with "no other choice."

• The decision came after the crypto exchange received a Wells notice on Aug. 22, signaling the regulator's intent to bring enforcement action regarding its alleged operation as an unregistered broker-dealer and secondary-market sales of "network tokens," including SOL, ADA, BNB, FIL, FLOW, ICP, ATOM, ALGO, NEAR and DASH.
• Crypto.com compared these tokens to bitcoin and ether, which it says are sold on its platform "in the exact same manner."
• While the SEC has declared bitcoin is not a security, it has been less clear about ether's status.
  Ultimately, Crypto.com is seeking a court declaration to confirm that it is not an unregistered broker-dealer or securities clearing agency and that the tokens in question are not securities.
• The lawsuit follows other crypto firms, like Consensys and Coinbase, who have similarly challenged the SEC's categorization of cryptocurrencies.
• The SEC has been actively pursuing legal action against major crypto exchanges, including Coinbase, Binance and Kraken over similar allegations.
• Crypto.com has also filed a petition with both the SEC and CFTC to clarify the regulatory status of certain cryptocurrency derivative products.
• The SEC did not respond to a request for comment from The Block.

Scroll unveils its token launch plans

Ethereum ETH -1.82% Layer 2 Scroll unveiled distribution plans for its upcoming governance token on Tuesday, in the zkEVM network's "first step toward decentralization."

A total of 1 billion SCR tokens will be distributed, with 15% reserved for community airdrops over the next 18 months, 25% for ecosystem projects, 20% for the Scroll DAO Treasury and Scroll Foundation and 40% for investors and contributors.

A screenshot, or the final date to use the Scroll protocol to qualify for the initial SCR airdrop, is set for Oct. 19, with the token launch date and airdrop claims set for Oct. 22.

Earlier on Tuesday, Binance announced it will launch pre-market trading for Scroll's native token starting on Oct. 11, claiming to be the first platform to do so.

Linea proposes its decentralization roadmap

Linea, another Ethereum Layer 2 ZK Rollup solution, backed by the web3 development firm Consensys, has proposed transitioning to a permissionless system for its zkEVM, including decentralized governance.

• The proposal from Linea software architect Florian Huc introduces a proof-of-stake model to replace the network's current Layer 2 finality system for block validation.
• If implemented, validators would be required to stake tokens and follow the QBFT consensus algorithm, with penalties for misbehavior through slashing, including burning a portion of their stake.
• Notably, Linea is yet to go through a token generation event.

Fan token daily trading volume surpasses $1 billion

Fan token trading volume jumped 220% to more than $1 billion over the past 24 hours, while the category's market capitalization rose 16% to $348.5 million, according to CoinMarketCap data.

• Fan tokens are crypto assets that let sports fans engage in team decisions and enjoy perks like voting on merchandise or joining exclusive events.
• More than half of the total volume came from the Chiliz-based OG Fan Token, the cryptocurrency for supporters of OG Esports, with $563 million traded, mostly on Binance, exceeding that of major cryptocurrencies.
• OG's price surged 87% during the period, with other sports fan tokens, like those for Santos FC and Alpine F1, also witnessing gains of 58% and 24%, respectively.

US spot Ethereum ETFs see another day of zero flows

U.S. spot Ethereum ETFs recorded zero flows on Monday following inflows of $7.4 million on Friday and outflows of $3.2 million on Thursday.

• ETFs experience zero flows when there isn't a significant enough mismatch between supply and demand to warrant the creation or redemption of shares, so market makers can simply handle the trading by facilitating transactions with existing shares.
• This marks the second time since launching in July that the spot Ethereum ETFs have recorded zero daily flows, with the previous occurrence on Aug. 30.
• Meanwhile, U.S. spot Bitcoin ETFs reported $235.2 million in net inflows on Monday, led by Fidelity's FBTC.

In the next 24 hours

• The latest U.S. FOMC meeting minutes are released at 2 p.m. ET on Wednesday.
• U.S. FOMC members Raphael Bostic, Thomas Barkin, John Williams and Mary Daly will speak at 8 a.m., 10:30 a.m., 11 a.m. and 6 p.m., respectively.
• Bitcoin Amsterdam 2024 kicks off in the Netherlands.

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