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

A
group
of
state
attorneys
general
and
the
DeFi
Education
Fund
sued
the
U.S.
Securities
and
Exchange
Commission
and
its
five
commissioners
alleging
the
agency
was
overstepping
its
bounds
in
bringing
enforcement
actions
against
crypto
exchanges.

The

lawsuit,
filed
Thursday
afternoon
in
the
U.S.
District
Court
for
the
Eastern
District
of
Kentucky,
asks
a
federal
judge
to
block
the
SEC
from
bringing
enforcement
actions,
arguing
“the
SEC’s
‘crypto
policy’
is
‘unlawful
executive
action'”
and
that
it
violated
the
Administrative
Procedures
Act.

“The
SEC’s
sweeping
assertion
of
regulatory
jurisdiction
is
untenable.
The
digital
assets
implicated
here
are
just
that
—
assets,
not
investment
contracts
covered
by
federal
securities
laws,”
the
lawsuit
said.

The
case
comes
as
Gary
Gensler,
the
SEC’s
Chair
under
President
Biden,
is

on
his
way
out,
with
once
and
future
president
Donald
Trump
expected
to
appoint
a
more
industry-friendly
successor.

The
SEC’s
approach
to
crypto
is
encroaching
upon
states’
rights
to
police
the
industry
on
their
own,
the
suit
argued.

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
doctrine’s
application
to
SEC
lawsuits
against
crypto
companies.

Miller
Whitehouse-Levine,
the
chief
executive
officer
of
DEF,
said
in
a
statement
that
the
suit
was
targeting
SEC
“overreach.”

“DeFi,
and
crypto
broadly,
promises
to
make
financial
services
and
the
digital
economy
more
accessible,
efficient,
interoperable,
dependable,
and
consumer-focused,”
he
said.
“The
SEC
currently
stands
as
a
barrier
to
realizing
this
promise.”

An
SEC
spokesperson
said,
“We
don’t
comment
on
litigation.
State
securities
regulators
have
been
strong
partners
in
efforts
to
uncover
and
prosecute
misconduct
in
the
crypto
markets.”

Earlier
Thursday,
Gensler
spoke
briefly
about
the
SEC’s
approach
to
crypto,
saying
it
followed
in
the
footsteps
of
his
predecessor,
Trump
appointee
Jay
Clayton.

“This
is
a
field
in
which
over
the
years
there
has
been
significant
investor
harm,”
Gensler
said.
“Further,
aside
from
speculative
investing
and
possible
use
for
illicit
activities,
the
vast
majority
of
crypto
assets
have
yet
to
prove
out
sustainable
use
cases.”

Kentucky
Attorney
General
Russell
Coleman
said
the
suit
aimed
to
“keep
the
federal
government
from
reaching
into
Kentuckians’
wallets.”

“Kentuckians
of
all
ages
and
backgrounds
are
eager
to
access
crypto
to
assert
their
financial
freedom
and
guard
against
historic
inflation,”
he
said.
“Instead
of
encouraging
this
vibrant
new
digital
industry,
the
Biden-Harris
Administration
is
unlawfully
cracking
down
on
cryptocurrency.”