18 Republican States and DeFi Education Fund Sue SEC Over Crypto Regulation Approach

Attorneys General from 18 Republican states have teamed up with the DeFi Education Fund to file a lawsuit against the U.S. Securities and Exchange Commission (SEC). They believe the SEC's approach to regulating cryptocurrency is too harsh.

The lawsuit claims that the SEC, led by Chairman Gary Gensler, is overstepping its bounds. The plaintiffs argue that the SEC's broad regulatory strategy lacks the necessary approval from Congress. Without this authorization, they say, the SEC shouldn't have such sweeping control over the cryptocurrency sector.

According to the states, the SEC's method of "regulation by enforcement" is stifling growth in the digital asset industry. They state, "The SEC's assertion of sweeping jurisdiction without congressional authorization deprives States of their proper sovereign role." This, they argue, chills the development of innovative regulatory frameworks.

The lawsuit also questions the SEC's enforcement actions. The plaintiffs say these actions lack clear standards and impose unfair burdens on industry participants. This uncertainty has forced some companies to move their operations overseas, which they claim has caused significant financial harm.

The states believe the SEC's stance threatens to undermine state laws that are designed to protect consumers in the digital asset space.

The timing of this lawsuit is significant. It comes as the national conversation about digital asset regulation heats up, especially with Benzinga's Future of Digital Assets conference approaching on November 19. This event will bring together key industry players and policymakers to discuss the future of cryptocurrency regulation in the U.S.

The states involved are seeking both declaratory and injunctive relief. They want to return to a regulatory approach led by states, which they believe will foster innovation and protect consumers without stepping on federal toes.

The states participating in the lawsuit include:

Kentucky (AG Russell Coleman)
Nebraska (AG Michael T. Hilgers)
Tennessee (AG Jonathan Skrmetti)
West Virginia (AG Patrick Morrisey)
Iowa (AG Brenna Bird)
Texas (AG Ken Paxton)
Mississippi (AG Lynn Fitch)
Montana (AG Austin Knudsen)
Arkansas (AG Tim Griffin)
Ohio (AG David Yost)
Kansas (AG Kris W. Kobach)
Missouri (AG Andrew Bailey)
Indiana (AG Theodore E. Rokita)
Utah (AG Sean D. Reyes)
Louisiana (AG Elizabeth B. Murrill)
South Carolina (AG Alan Wilson)
Oklahoma (AG Gentner Drummond)
Florida (AG Ashley Moody)

Stay tuned for updates as this situation unfolds.