An amicus brief from several state attorneys general is challenging the SEC’s expansive approach to cryptocurrency regulation, arguing that the SEC is overstepping its bounds and stifling innovation. The brief, supported by Iowa, Arkansas, Indiana, Kansas, Montana, Nebraska, and Oklahoma, claims the SEC’s actions threaten state authority and consumer protection. By criticizing the SEC’s regulatory tactics and enforcement history, especially in cases like SEC v. SafeMoon LLC, the coalition argues that proper legislative frameworks are needed, rather than enforcement actions that could undermine state regulations and market stability.
Several state attorneys general, led by Iowa’s Brenna Bird, have filed an amicus brief challenging the U.S. Securities and Exchange Commission (SEC) over its approach to regulating cryptocurrencies. The brief, supported by a coalition of states including Arkansas, Indiana, Kansas, Montana, Nebraska, and Oklahoma, accuses the SEC of overstepping its authority and stifling innovation within the crypto industry.
The states argue that the SEC’s “power grab” threatens to preempt crucial state laws that are essential for protecting consumers from cryptocurrency scams. Attorney General Bird criticized the SEC for trying to undermine state efforts to enforce laws and safeguard families.
The brief raises constitutional concerns, emphasizing that regulating a multi-trillion-dollar industry like cryptocurrency should require explicit authorization from Congress—a power they believe the SEC lacks. They also argue that the SEC’s reliance on enforcement actions, rather than establishing proper legislative frameworks, violates the Administrative Procedure Act (APA).
A particular focus is on the SEC’s history of enforcement actions against crypto entities, such as the case against SafeMoon LLC, where the SEC classified its token as a security based on price fluctuations. The coalition warns that this broad standard could allow the SEC to regulate any commodity that experiences value changes, not just cryptocurrencies.
By challenging the SEC’s authority, the coalition aims to ensure that state consumer protection laws remain effective and that the free market is not unduly constrained. The brief contends that the SEC’s regulatory approach undermines both state authority and market stability, potentially harming consumers and stifling the growth of the cryptocurrency sector.
At the time of publication, the SEC had not responded to the filing. The broader implications of this challenge could reshape the regulatory landscape for cryptocurrencies, balancing federal oversight with state-level consumer protections.
