Crypto vs SEC: 18 States Fight Back Against Harsh Regulations

Eighteen U.S. states have come together to file a lawsuit against the U.S. Securities and Exchange Commission (SEC), accusing the agency of overstepping its authority in cryptocurrency regulation. Led by Kentucky Attorney General Russell Coleman, the coalition includes key figures like Florida’s Ashley Moody, Texas’s Ken Paxton, and Tennessee’s Jonathan Skrmetti.

Their argument? The SEC’s vague rules are infringing on states’ rights.

Let’s break down the details and understand what’s really at stake.

SEC Accused of Power Grab

The attorneys general argue that SEC Chair Gary Gensler is trying to assert too much control over the crypto industry. Gensler has stated that most cryptocurrencies, except Bitcoin and Ethereum, should be classified as securities. This stance has driven the SEC to target major companies like Coinbase and Ripple, accusing them of failing to register their assets properly.

However, the states claim the SEC is overreaching its authority and ignoring the original intent of Congress for cryptocurrency oversight. This aggressive approach, they say, is creating confusion and stifling a rapidly growing industry.

The coalition believes crypto regulations should be handled mainly at the state level to better address local needs. By doing so, they argue, states can foster innovation and support businesses without federal interference disrupting progress.

With the crypto industry still evolving, state leaders see federal overreach as a threat to future growth.

Political and Industry Backing

The lawsuit is also gaining support from influential politicians. Tennessee Senator Bill Hagerty has criticized what he calls the SEC’s “anti-crypto agenda.” The lawsuit aligns with President-elect Donald Trump’s recent pledge to limit federal oversight and support the crypto sector.

For many in the industry, this is a chance to push back against excessive regulation. Advocates and AGs like Indiana’s Theodore E. Rokita, Mississippi’s Lynn Fitch, and Missouri’s Andrew Bailey argue that states are better positioned to craft practical, innovation-friendly crypto rules.

This isn’t the first time the SEC’s actions have faced criticism. Former U.S. Senate candidate John E. Deaton recalled suing the SEC in early 2021 after it filed charges against Ripple. Despite a ruling in Ripple’s favor by Judge Torres, the SEC has continued its enforcement actions, frustrating many in the crypto world.

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What’s at Stake for Crypto?

The outcome of this lawsuit could have a massive impact on U.S. crypto regulations. If the states win, it could shift regulatory power away from federal agencies like the SEC and give states like Oklahoma, led by AG Gentner Drummond, and Iowa, under AG Brenna Bird, greater control over crypto policies.

Such a victory could pave the way for clearer, more innovation-friendly rules.