A
group
of
state
attorneys
general
are
arguing
that
the
U.S.
Securities
and
Exchange
Commission
exceeded
its
authority
in
suing
the
crypto
exchange
Kraken.
State
law
enforcement
officials
from
Montana,
Arkansas,
Iowa,
Mississippi,
Nebraska,
Ohio,
South
Dakota
and
Texas
filed
a
joint
amicus
brief
–
or
friend
of
the
court
filing
–
in
the
SEC’s
suit
against
Kraken
on
Thursday,
alongside
a
number
of
industry
lobbyists
and
other
participants.
Saying
the
SEC’s
suit
might
even
harm
consumers,
the
state
AGs
argued
that
the
agency
was
expanding
the
definition
of
an
“investment
contract,”
and
that
cryptocurrencies
“are
not
automatically
securities.”
The
filing,
which
echoed
some
of
Kraken’s
own
arguments
–
as
well
as
other
crypto
companies
–
said
the
states
were
not
filing
in
support
of
the
exchange,
but
rather
in
opposition
to
the
federal
regulator.
“States
have
a
strong
interest
in
preventing
the
potential
preemption
of
consumer
protection
and
other
state
laws
by
the
SEC’s
attempt
to
regulate
crypto
assets
as
securities,”
the
filing
said.
“…
The
SEC’s
exercise
of
this
undelegated
authority
puts
consumers
at
risk
by
potentially
preempting
state
statutes
better
tailored
to
the
specific
risks
of
non-securities
products.
Some
state
laws
are
more
protective
of
consumers
than
the
federal
securities
laws.”
State
cases
have
helped
clarify
the
definition
of
investment
contracts
in
the
past,
the
filing
said.
If
the
SEC
wins
its
suit,
it
might
be
able
to
preempt
state
consumer
protection
laws,
as
well
as
state
regulations
around
crypto,
the
filing
said.
The
SEC
sued
Kraken
last
fall,
alleging
the
exchange
had
failed
to
register
as
a
securities
broker,
clearinghouse
or
trading
platform.
It’s
a
similar
complaint
the
SEC
has
brought
against
companies
like
Coinbase,
Binance
and
Bittrex’s
U.S.
branch.
While
Bittrex
settled,
the
Coinbase
and
Binance/Binance.US
suits
are
ongoing.
Unlike
those
other
suits,
the
SEC
argued
that
Kraken
was
explicitly
involved
in
touting
11
different
digital
assets
it
said
the
exchange
listed
as
unregistered
securities.
The
SEC
also
alleged
Kraken
commingled
customer
and
corporate
funds.
Kraken
filed
a
motion
to
dismiss
last
week,
arguing
the
SEC
had
failed
to
“plausibly
allege”
its
arguments,
and
that
it
was
overreaching
its
bounds
–
similar
arguments
to
those
made
by
Coinbase
and
Binance.
The
case
saw
a
flurry
of
amicus
briefs
on
Wednesday
and
Thursday
from
industry
groups
like
the
Chamber
of
Digital
Commerce,
the
Blockchain
Association
and
the
DeFi
Education
Fund.
U.S.
Senator
Cynthia
Lummis
(R-Wyo.)
also
filed
a
brief,
similar
to
the
one
her
office
filed
in
the
SEC’s
case
against
Coinbase.
