In a bold move, 18 US states have banded together to file a lawsuit against the Securities and Exchange Commission (SEC), challenging what they see as excessive federal intervention in cryptocurrency regulation. The lawsuit is led by Kentucky Attorney General Russell Coleman, joined by attorneys general from Florida (Ashley Moody), Texas (Ken Paxton), and Tennessee (Jonathan Skrmetti).

States Accuse SEC of Abusing Power

Attorneys general have argued that SEC Chairman Gary Gensler is trying to exert too much control. Gensler has argued that most cryptocurrencies, except for big names like bitcoin and ether, should be treated as securities. Because of this stance, the SEC has sued several major cryptocurrency companies like Coinbase and Ripple, alleging that they failed to register their assets as required.

However, states see it differently. They argue that the SEC’s actions go beyond its authority and even contradict the purpose of the US Congress when it created regulations to oversee cryptocurrencies. They worry that this approach creates confusion and could harm the rapidly growing industry.

States Complaint: Governance Needs to Be Local

States argue that cryptocurrency regulation should be done primarily at the local level, to suit the specific needs of each region. With digital assets still in their infancy, they worry that federal intervention could stifle innovation and business growth.

Political and Industry Support

The lawsuit has support from political leaders beyond states. Tennessee Senator Bill Hagerty has spoken out against what he calls the SEC’s “anti-crypto agenda.” The lawsuit also aligns with a recent pledge by President-elect Donald Trump, who has promised to limit federal oversight in favor of the cryptocurrency industry.

Industry activists, along with attorneys general like Theodore E. Rokita (Indiana), Lynn Fitch (Mississippi), and Andrew Bailey (Missouri), support the view that states are better positioned to create more practical cryptocurrency regulations.

Former US Senate candidate John E. Deaton also shared his pride in suing the SEC on January 1, 2021, just nine days after they filed a lawsuit against Ripple regarding XRP.

What is Expected?

This lawsuit could bring major changes to the cryptocurrency industry in the US. With Republicans in key positions and a possible change in leadership at the SEC, we could see more crypto-friendly regulations focused on states’ rights.

If the plaintiffs prevail, states like Oklahoma (Gentner Drummond) and Iowa (Brenna Bird) could soon gain greater control over cryptocurrency policy. With the SEC dragging out its Ripple lawsuit for years despite Judge Torres’ clear ruling, the crypto community is eagerly awaiting how the case will play out.

The ruling could reshape how digital assets are regulated, opening the door to clearer and more innovation-friendly rules.

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