KEY POINTS
- The lawsuit referred to the SEC's sweeping claims of jurisdiction over digital assets as 'untenable'
- It also criticized the SEC's actions against crypto that were allegedly implemented 'without congressional authorization'
- Gensler on Thursday released a statement that seemed to hint his potential resignation
Eighteen U.S. states, led by Nebraska and Kentucky, have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) "for overstepping its authority" through its "unlawful" regulations targeting the cryptocurrency industry.
On Thursday, Nebraska Attorney General Mike Hilgers said the incumbent administration's SEC "is introducing more red tape into this innovative and important financial sphere," referring to the crypto sector.
Montana, Texas, Arkansas, West Virginia and Utah are among other states that joined the suit.
States Blast SEC's Regulatory Overreach
The lawsuit referred to the industry as a "promising" one that has encouraged innovation, created new jobs and provided more financial service access to Americans.
"The SEC's sweeping assertion of regulatory jurisdiction is untenable," the lawsuit stated, adding that its "sweeping claim of agency dominion reaches far beyond anything Congress authorized in any statute, and certainly far beyond anything Congress authorized with the clarity that would be necessary to evince its intention to grant such extraordinary regulatory power."
The states went on to criticize the SEC for its "regulatory landgrab" that has resulted in some crypto firms "threatened" by the financial regulator's actions to go for "quick settlements" while others were forced to move their business overseas.
They claim that the SEC's assertion of its jurisdiction over digital assets "without congressional authorization" not only chills the development of innovative regulatory frameworks for the industry but also robs states of their "proper sovereign role."
The complaint was filed in cooperation with DeFi Education Fund, a nonprofit that seeks to educate policymakers and the general public about the potential of decentralized finance.
What the 18-Strong Coalition Wants
In particular, the states want the court to declare that a "digital asset transaction is not an investment contract" under U.S. securities laws if it doesn't transfer any stake "in any enterprise that the seller or anyone else has an obligation to manage for the asset owner's benefit and share resulting profits."
They also urged the court to declare that the SEC violated the Administrative Procedure and should be stopped from bringing further enforcement actions based "on the failure of digital asset platforms facilitating such secondary transactions to register."
Is Gensler Ready to Leave the SEC?
News of the lawsuit came as Gensler reflected on his time as the SEC chief, with remarks that seemed to suggest he may leave his post.
In his Thursday statement, he first defended the actions of the regulatory agency toward crypto under his leadership, saying that "not every asset is a security" and that his SEC has "never treated Bitcoin as a security."
He went on to say that the crypto sector is a field where "there has been significant investor harm" over the years and has become a possible use case for illicit activities.
"It's been a great honor to serve with them [SEC staff]," he wrote in his concluding remarks, adding that he has "been proud to serve" with his colleagues in the agency.
Many crypto users have been calling on Gensler to resign now that work is underway for the administrative turnover to the Donald Trump government. The president-elect promised earlier this year that he will "fire" Gensler on his first day at the White House.
Since 2016, the former SEC chairs have resigned within weeks after a new president was elected.
