Eighteen States Request that the SEC Halt Enforcement of Cryptocurrency Regulations.
This is just part of an ongoing power struggle.
The U.S. Securities and Exchange Commission (SEC) is facing a lawsuit from 18 states that accuse the agency of trying to "unilaterally strip the states of their regulatory authority" over cryptocurrencies. The suing states seek to halt the SEC's enforcement actions so they can manage cryptocurrency regulation themselves. The lawsuit also includes the DeFi Education Fund, a special interests lobbying group.
Gary Gensler, the SEC chair, and other commissioners are mentioned in the lawsuit. Gensler's approach to cryptocurrencies during his tenure has drawn criticism from both the industry and notable Republican political figures, including elected President Donald Trump.
This conflict over cryptocurrency regulation has generated an ongoing power struggle. So far, the primary contenders in this dispute have been the SEC and the Commodity Futures Trading Commission, which is viewed as the preferred regulator by the crypto industry. Led by Russell Coleman, the Attorney General of Kentucky, the states have decided to intervene in this conflict.
The SEC has made significant strides against the crypto industry, and several judges have upheld its jurisdiction in multiple cases. The lawsuit argues that "the SEC's broad assertion of regulatory jurisdiction is untenable," claiming that "the digital assets in question are just that: assets, not investment contracts covered by federal securities laws." This argument has sparked considerable controversy.
For its part, Coinbase, which is also facing a lawsuit from the SEC, has argued that the legal action should be dismissed, as it is not trading securities. However, U.S. District Judge Katherine Polk Failla dismissed Coinbase's assertion, allowing the case to proceed. Failla stated that while the term "crypto" is recent, the questioned transactions fall within the criteria that courts have used to identify securities for nearly eighty years.
Additionally, the states' lawsuit argues that a precedent known as the major questions doctrine establishes that the SEC should not litigate against the crypto industry without Congressional approval. This point has also been a subject of debate, as judges have rejected this line of reasoning put forth by Terraform Labs and Coinbase.