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The Securities and Exchange Commission (SEC) is facing an unprecedented legal challenge as 18 US states joined together to condemn its aggressive policies towards the cryptocurrency industry. The landmark legal action, led by Kentucky Attorney General Russell Coleman, marks a major escalation in the conflict between federal regulators and digital asset advocates.
18 US states are suing the SEC over cryptocurrency crackdowns
On November 14, an alliance of 18 Republican attorneys general led by Russell Coleman of Kentucky filed a lawsuit against the SEC and its commissioners. The states suing include Texas, Florida, Tennessee and Utah, backed by the DeFi Education Fund, a nonprofit dedicated to Web3.
States accuse the SEC of illegally expanding its jurisdiction over the crypto sector without congressional approval. According to the complaint, this excessive regulation significantly hinders innovation in one of the most dynamic sectors of the US economy.
In particular, the coalition condemns enforcement actions against major players such as Coinbase, Ripple and Kraken, which it sees as examples of unwarranted regulatory authoritarianism.
The Howey test at the heart of the controversy
The complaint directly challenges the SEC’s use of the Howey test, a legal framework dating back to 1946, to classify cryptocurrencies as securities. The states challenge the agency’s sweeping interpretation of this test, citing in particular the July 2023 decision favorable to Ripple.
Under the leadership of Gary Gensler since 2021, the SEC has increased punitive actions against the crypto industry. In particular, the agency fined Kraken $30 million and targeted other major players such as Uniswap Labs and OpenSea.
The SEC chairman stands by his position, saying at a recent conference that “the vast majority of crypto-assets have yet to prove their continued utility” and that their failure has caused significant damage to investors.
In the face of this major legal battle and the changing political context, the future of cryptocurrency regulation in the United States could see significant changes. This legal action marks a decisive turn in the relationship between the states and the federal regulator of financial markets.
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I am passionate about Bitcoin, I love exploring the intricacies of blockchain and cryptocurrency and sharing my discoveries with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I firmly believe that Bitcoin is the tool that can make this possible.
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The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.
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