- Seven US states have united to contest the SEC’s cryptocurrency regulation
- The coalition has argued that the SEC’s power grab could protect citizens from scammers but bypasses state consumer-protection laws
- The states have accused the SEC of abusing its power by overreaching into cryptocurrency regulation without proper authority
A coalition of seven US states is uniting to contest the US Securities and Exchange Commission’s (SEC) regulation of cryptocurrency. This collective action was announced earlier this month by the Office of the Attorney General of Iowa, led by Iowa Attorney General Brenna Bird, and includes support from Arkansas, Indiana, Kansas, Montana, Nebraska, and Oklahoma. The group argues that while the SEC’s “power grab” might protect citizens from scammers, it is now trying to “abuse its power” by regulating the sector, bypassing state consumer-protection laws.
“Power Grab” Goes Too Far
The coalition made its announcement via an amicus brief on July 10, asserting that the SEC’s regulatory attempts constitute an overreach of its authority. The states argue that the SEC’s actions will stifle innovation within the cryptocurrency industry and hinder the states’ ability to protect their citizens from fraudulent schemes, despite this being its primary goal.
Iowa, known for its proactive stance against scams, sees the SEC’s actions as a direct threat to state autonomy, with Attorney General Bird alleging that the agency’s actions contravene the law:
Scammers need to be held accountable. The Biden SEC is trying to prevent states like Iowa from doing their job to hold robbers to the law and protect families from the dangers of cryptocurrency scams. This power grab will also hurt the free market and allow the SEC to take the regulatory reins over the cryptocurrency industry with no accountability. The SEC’s bypassing Congress to give itself new power is illegal, stifles innovation, and will let scammers off the hook.
Cryptocurrencies Are Not Securities
The amicus brief argues that the SEC is violating both the Administrative Procedure Act and the Major Questions Doctrine by exceeding its jurisdiction. It contends that typical cryptocurrencies do not meet the definition of investment contracts under the Securities Act of 1934, a stance the SEC has stood resolutely by. The group urged the court to restrain the SEC from extending its regulatory reach.
This legal challenge underscores a significant pushback against federal overreach in the rapidly evolving cryptocurrency landscape, which has gathered steam in recent years, especially after heavily publicized defeats inflicted on the SEC.
