- Utah and 17 other states believe these should be the states that should have the power to regulate cryptocurrencies.
- Kentucky led efforts in the lawsuit, and Utah Attorney General Sean Reyes assisted.
- The SEC did not respond to a request for comment on the lawsuit.
Utah and 17 other states have sued a federal agency over how it regulates cryptocurrencies. The states claim that the federal agency in question exceeded its powers in doing so and should have left it to the states.
Kentucky Attorney General Russell Coleman led the effort to file a lawsuit against the Securities and Exchange Commission. It was filed Thursday. Coleman recently told Fox Business that in the election, Americans “rejected the militarization of the federal government.”
“The Biden-Harris administration’s illegal crackdown on crypto has targeted the tens of millions of ordinary people who participate in this vibrant digital marketplace,” Coleman said. “Together with conservative attorneys general across the country, we are filing this challenge to shrink the bureaucracy down to size.”
Utah Attorney General Sean Reyes also helped lead the coalition of states that brought the suit. Reyes is the immediate past president of the National Association of Republican Attorneys General.
States like Louisiana, Missouri, Texas, and Florida have joined the lawsuit as well as the DeFi Education Fund.
This calls into question the authority of the SEC to regulate cryptocurrencies. The SEC is a federal agency that oversees and regulates securities markets, such as stocks or bonds.
The suit questioned whether or not digital assets such as cryptocurrencies should be regulated by the SEC. Instead, states argued, it should be up to them to determine how to regulate the digital assets sector.
“The States have fulfilled their constitutional role as ‘testing laboratories to design various solutions’ for government oversight of the digital asset sector, allowing other States and the federal government to learn from their experiences,” the suit says.
The Deseret News reached out to the SEC’s press contact requesting a statement and did not hear back prior to publication.
Reyes said in a statement that the SEC was overstepping its authority and using outdated legal theories to justify it.
“The desire to prevent the misuse of crypto is understandable,” he said. “But there are ways to do it constitutionally. States like Utah have adopted approaches to balancing blockchain growth and safeguards. The SEC’s attempt to regulate most digital assets into oblivion is completely inappropriate.
What are the demands of States?
The coalition of states said in the complaint that because of blockchain technology, there is a digital asset industry worth billions of dollars. The states said state governments have regulated the sector by creating frameworks that enable growth and also protect consumers.
“Although states’ regulatory approaches have varied based on local needs, they have always strived to provide transparent and administrable traffic rules,” the suit states. “And Congress has repeatedly rejected proposals to give federal agencies broad regulatory authority over digital assets.”
The suit alleged that the SEC took regulatory authority away from the states through enforcement actions without having congressional authorization to do so.
Are digital assets considered securities? The suit claims that digital assets are assets and not investment contracts, which would be considered securities, even though the suit claims that the SEC operates as if these assets were securities.
Under federal law and previous Supreme Court precedent, the suit said the SEC does not have the authority to regulate all digital asset transactions as securities transactions. The suit claimed that Congress had not granted this regulatory authority.
Instead, states said they were better positioned to regulate the industry.
“Worse, by attempting to fit digital assets into ill-fitting federal securities laws and inadequate disclosure regimes, the SEC is harming the very citizens it purports to protect by superseding better state laws. adapted and carefully designed to ensure consumer protection. in the digital assets industry,” the suit alleges.
In addition to arguing that power should rest with the states, the lawsuit alleges that state economies have suffered from the SEC’s approach.
The suit claimed that under the theory the SEC uses to regulate digital assets, the agency could also regulate sales of products such as Nike sneakers or baseball cards.
“It would leave the SEC with virtually unlimited jurisdiction and impose the complex and detailed disclosure requirements of the federal securities laws on all manner of transactions that have never been considered within their scope,” the statement said. pursuit.
The states asked the court to declare that a digital asset transaction does not constitute an investment contract under certain conditions. They also wanted the court to declare that the SEC also cannot initiate enforcement actions based on certain criteria.
The states also asked the court to award attorneys’ fees and costs.
