Republican State AGs and DeFi Lobby Sue SEC Over Crypto Enforcement Actions

On Thursday afternoon, a legal complaint was submitted in the U.S. District Court for the Eastern District of Kentucky. This complaint seeks a federal judge to prevent the Securities and Exchange Commission (SEC) from taking any enforcement actions. The argument is that the SEC’s approach towards cryptocurrencies, referred to as their “crypto policy,” is an unlawful executive action, and it has allegedly violated the Administrative Procedures Act.

The broad claim by the SEC over regulatory authority is unsustainable. The digital assets involved in this case are simply assets and not investment contracts subject to federal securities regulations, as stated in the lawsuit.

The lawsuit contends that the Securities and Exchange Commission’s handling of cryptocurrencies infringes on states’ ability to regulate the industry independently.

The suit also pointed to the major questions doctrine, a Supreme Court precedent that says federal agencies shouldn’t litigate issues not directly assigned to them by Congress. Other federal courts have rejected the major questions doctrine’s application to SEC lawsuits against crypto companies.

Miller Whitehouse-Levine, CEO of DEF, declared in a statement that the lawsuit is challenging what they perceive as excessive actions by the SEC.

He stated that decentralized finance (DeFi) and cryptocurrencies in general aim to make financial services and the digital economy more inclusive, streamlined, compatible, reliable, and centered around consumers. However, he pointed out that the Securities and Exchange Commission (SEC) currently poses a hurdle in achieving this goal.

A representative from the Securities and Exchange Commission stated, “We do not provide comments regarding court cases. However, state securities authorities have been valuable allies in our mission to discover and penalize fraudulent activities within the cryptocurrency market.

Yesterday, serving as a researcher focusing on regulatory matters, I found myself reflecting on Chair Gary Gensler’s recent remarks concerning the Securities and Exchange Commission’s (SEC) stance towards cryptocurrencies. In his address, he acknowledged that the SEC’s approach mirrors that of his predecessor, Jay Clayton, who was appointed during the administration of former President Donald Trump.

In this area, it’s clear that investors have experienced substantial losses over time, according to Gensler. Moreover, apart from being used for gambling and potentially illegal transactions, most cryptocurrencies have not demonstrated practical uses that can be sustained in the long term.

As an analyst, I would rephrase Kentucky Attorney General Russell Coleman’s statement as follows: “I am pursuing legal action to safeguard Kentuckians’ financial privacy and prevent unwarranted interference with their personal finances by the federal government.

People from all walks of life in Kentucky are keen to explore cryptocurrencies as a means to secure their financial independence and shield themselves from persistent inflation, it was stated. Rather than fostering this dynamic and innovative digital sector, the Biden-Harris Administration appears to be taking unnecessary legal action against cryptocurrency.