18 States Sue SEC Over Crypto Crackdown as Trump Prepares to Shift Regulatory Leadership

As we look ahead to a potential shift in regulatory leadership after Donald Trump’s election, 18 states are stepping up. They’ve filed a lawsuit against the Securities and Exchange Commission (SEC) and its commissioners, including Chairman Gary Gensler. This move comes in response to the SEC's ongoing crackdown on the crypto industry.

The lawsuit, filed on Thursday, involves 18 states and their Republican attorneys general, along with the DeFi Education Fund. They claim that the SEC has violated the U.S. Constitution in how it regulates digital assets.

The lawsuit argues that “without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions targeting the digital asset industry.” It was submitted to a federal court in Kentucky and calls the SEC’s broad claim of regulatory power “untenable.”

Furthermore, the suit alleges that the SEC, under Gensler’s leadership, has intentionally ignored standard procedures regarding cryptocurrency. They claim the agency has avoided releasing new crypto rules to sidestep issues with its so-called “regulatory land grab.”

The 18 states, led by Kentucky, are asking a federal judge for declaratory and injunctive relief. Essentially, they want to stop the SEC from suing crypto companies.

Kentucky Attorney General Russell Coleman has framed the lawsuit in starkly partisan terms. He stated, “Instead of encouraging this vibrant new digital industry, the Biden-Harris Administration is unlawfully cracking down on cryptocurrency.” He emphasized that conservative attorneys general across the nation are working to protect the financial interests of their constituents, both physical and digital.

With Trump promising to support the digital assets industry, and the expectation that he will appoint a pro-crypto SEC chair, this lawsuit seems aimed at sending a message to the outgoing administration. It also seeks to prevent any future SEC chair from taking action against the industry like Gensler has.

The attorneys general have formally requested that the court instruct the SEC to refrain from future enforcement actions against digital asset platforms, especially regarding the treatment of “secondary transactions in common digital assets as ‘investment contracts.’”

In related news, Ilya Lichtenstein, who was involved in the 2016 theft of over 119,000 Bitcoin from Bitfinex, has been sentenced to 60 months in prison for money laundering. The U.S. Department of Justice announced this decision, marking a significant conclusion to one of the largest cyber thefts in history. This case involved a seven-year investigation by various U.S. agencies.

Additionally, Delhi Police have arrested a man from West Bengal in connection with a major cyberattack on WazirX, India’s largest crypto exchange. This hack, which occurred in July, resulted in losses of about $235 million. The attackers targeted the platform’s hot and cold wallets. The accused, SK Mausad Alam, is now in custody for allegedly facilitating the breach by opening a fraudulent account.

In another notable development, President-elect Donald Trump has appointed pro-crypto Congressman Matt Gaetz from Florida as the next Attorney General of the United States. This decision has surprised many and signals a strong commitment to a pro-crypto agenda during Trump’s second term. Gaetz is known for his advocacy of Bitcoin, indicating that cryptocurrency initiatives will be prioritized.