The U.S. Securities and Exchange Commission wants to “unilaterally wrest state regulatory authority” over crypto, according to a lawsuit filed by 18 states. These states want to end SEC enforcement actions so they can handle crypto regulation instead. The DeFi Education Fund, a special interest lobbyist, is also named as a plaintiff in the suit.
Controversial SEC Chairman Gary Gensler is named in the suit, along with other SEC commissioners. Gensler’s treatment of crypto during his time as president made him a punching bag for the industry — and for Republicans such as President-elect Donald Trump.
Gensler’s SEC has scored significant victories against the crypto industry – and in several court cases, judges have agreed that the SEC has jurisdiction over crypto. “The SEC’s sweeping assertion of regulatory jurisdiction is untenable,” the lawsuit asserts. “The digital assets involved here are just that: assets, not investment contracts covered by federal securities laws.”
This is both boring and highly questionable. Coinbase, which is being sued by the SEC, argued that the suit should be dismissed because Coinbase does not trade securities. U.S. District Judge Katherine Polk Failla ruled against Coinbase – and the case is ongoing. “The ‘crypto’ nomenclature may be recent, but the disputed transactions fit comfortably within the framework that courts have used to identify securities for nearly eighty years,” Failla wrote.
The states’ suit also argues that a precedent called the major issues doctrine means the SEC should not bring lawsuits against the crypto industry without congressional approval. This too is very debatable: the judges rejected this argument from Terraform Labs and Coinbase.
