Eighteen U.S. states have filed a lawsuit against the Securities and Exchange Commission (SEC) and its Chairman Gary Gensler, accusing the financial regulator of abusing its power over the burgeoning crypto industry. The plaintiffs include states such as Nebraska, Tennessee, Wyoming, Kentucky, West Virginia, Iowa, Texas, Mississippi, Ohio, Montana, and more. The lawsuit claims:

“The SEC has failed to respect this allocation of authority. Instead, without congressional authorization, the SEC has unilaterally sought to usurp the states’ regulatory authority through a series of ongoing enforcement actions.”

According to the Blockchain Association, lawsuits related to SEC regulatory actions against the crypto industry have cost companies in the industry a total of $426 million since 2021. Industry executives have long criticized the agency's lack of a unified digital asset policy, arguing that it is the biggest barrier for developers in the United States.

Class action lawsuit from 18 US states against SEC and Gary Gensler | Source: Eleanor Terrett

Following the election of Donald Trump, many investors and executives in the crypto industry expect a significant change in SEC leadership, which could happen as early as January 2025 when Trump takes office.

Several figures are reportedly being considered as potential candidates to replace Gensler, including SEC Commissioner Mark Uyeda, who has been highly critical of Gensler’s compliance-over-enforcement approach. Uyeda appeared on Fox Business in October 2024, discussing the cryptocurrency regulatory landscape and calling Gensler’s policies “disastrous for the entire industry.”

Dan Gallagher, Robinhood's chief legal, compliance and corporate affairs officer, is also a potential candidate for SEC chairman. Gallagher, a former SEC commissioner from 2011-2015, is currently preparing to face the Wells Notice the SEC sent to Robinhood Crypto in May 2024.

Despite the incoming U.S. President’s pledge to remove Gary Gensler, the SEC Chairman continues to speak out against the crypto industry. In a speech at the 56th Annual Institute for the Practice of Securities Regulation on November 14, 2024, Gensler stressed:

“This is an area that has caused significant losses to investors over the years. Aside from speculative investment and the potential for illegal use, most crypto assets have yet to demonstrate sustainable use cases.”

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