18 States Sue Biden Administration Over SEC Crypto Actions

Eighteen US states have filed a lawsuit against the Securities and Exchange Commission (SEC) and members of the Biden administration. 

The lawsuit, lodged in the US District Court for the Eastern District of Kentucky Frankfort Division, accuses the SEC of overstepping its authority by imposing unlawful regulations on cryptocurrency companies and their employees.

The lawsuit is spearheaded by Kentucky Attorney General Russell Coleman and includes attorneys general from Nebraska, Tennessee, West Virginia, Iowa, Texas, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, Oklahoma, Florida, and the DeFi Education Fund. 

Allegations Against The SEC

The central claim of the lawsuit is that the SEC has engaged in an unconstitutional overreach by regulating cryptocurrencies as investment contracts akin to stocks or bonds. 

Under SEC Chair Gary Gensler’s leadership, the agency has pursued what the plaintiffs describe as a “regulatory assault” on crypto companies. This approach involves classifying cryptocurrencies as securities subject to SEC regulation without clear congressional authorization.

The lawsuit points to several instances where the SEC has taken aggressive enforcement actions based on expansive legal theories previously disavowed by the agency. 

Notably, in 2022, the SEC sued a Coinbase employee and his brother but did not sue Coinbase itself or allege that the digital assets were securities. In June 2023, similar enforcement actions were taken against major crypto exchanges like Coinbase and Binance.

Explore: Coinbase To Cut Ties With Law Firms Linked To Former SEC Officials, Armstrong Promises

SEC’s Actions Unlawfully Encroached Upon State Sovereignty 

18 states sue Biden administration over SEC crypto currency actionshttps://t.co/6xpNcrrFIM

— The Center Square (@thecentersquare) December 3, 2024

The plaintiffs argue that the SEC’s actions have unlawfully encroached upon state sovereignty by imposing federal regulations on digital assets without congressional approval.

The states involved in the lawsuit highlight their own efforts to regulate digital assets within their jurisdictions. 

These efforts include implementing regulatory regimes for financial institutions focused on digital assets, requiring digital asset platforms to obtain money-transmitter licenses and security bonds to ensure liquidity, and allowing citizens to use digital assets for tax payments. 

For instance, Kentucky has enacted laws to take control of abandoned property, including virtual currency.

Kentucky is particularly notable for its significant involvement in crypto mining, boasting the second-highest collective computing power in the US devoted to this activity. 

The state offers tax incentives to digital asset miners to encourage investment and job creation. The lawsuit argues that the SEC’s regulations hinder these state-level initiatives by imposing federal oversight that conflicts with state laws.

Meanwhile, Donald Trump has reportedly selected Paul Atkins, a crypto advocate and former SEC commissioner, as his choice to lead the Commission.

Explore: Donald Trump Picks Crypto Ally Paul Atkins As Next SEC Chair – 99Bitcoins

Disclaimer

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