The US Securities and Exchange Commission is facing a lawsuit from 18 states, accusing them of trying to take control of crypto regulation away from the States. The states want to stop the SEC’s enforcement actions so they can handle crypto regulation themselves. The DeFi Education Fund, a special interest lobbyist, is also involved in the suit.
Controversial SEC chair Gary Gensler, along with other SEC commissioners, is named in the lawsuit. Gensler’s handling of crypto has made him a target for the industry and Republicans like president-elect Donald Trump.
Despite significant victories for the SEC in court cases, the lawsuit argues that the SEC’s claim of regulatory jurisdiction over crypto is unsustainable. The digital assets in question are considered assets, not investment contracts covered by federal securities laws.
The ongoing legal battle with Coinbase, which contests the SEC’s claims that it is trading securities, has raised further debate on the issue. US District Judge Katherine Polk Failla ruled against Coinbase, stating that the transactions in question align with the traditional framework used to identify securities.
The states’ lawsuit also brings up the major questions doctrine, arguing that the SEC should not be able to litigate against the crypto industry without Congressional approval. However, previous court decisions have rejected this argument from Terraform Labs and Coinbase.
