18 states want the SEC to stop enforcing crypto regulation

The US Securities and Exchange Commission wants to “take away regulatory authority from the States” when it comes to crypto, according to a lawsuit from 18 states. These states want to stop the SEC’s enforcement actions, so they can handle crypto regulation instead. Also named as a plaintiff in the lawsuit is the DeFi Education Fund, a special lobbyist.

Controversial SEC chairman Gary Gensler has been named in the lawsuit, along with other SEC commissioners. Gensler’s handling of crypto during his tenure as chairman has made him a punching bag for the industry — and for Republicans like president-elect Donald Trump.

Gensler’s SEC has made significant gains in the crypto industry – and in several court cases, judges have agreed that the SEC has jurisdiction over crypto. “The SEC’s blanket assertion of regulatory authority is invalid,” the lawsuit said. “The digital assets mentioned here are just that – assets, not investment contracts covered by federal securities laws.”

This is both offensive and highly controversial. Coinbase, which was sued by the SEC, said the suit should be dismissed because Coinbase does not sell securities. US District Judge Katherine Polk Failla ruled against Coinbase – and the case continues. “The term ‘crypto’ may be a first, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eight decades,” Failla wrote.

The state’ suit also says that the precedent called the doctrine of major questions means that the SEC should not judge the crypto industry without Congressional approval. This, too, is highly controversial: the judges rejected this argument from Terraform Labs and Coinbase.