On November 14, eighteen US states filed to sue the Securities and Exchange Commission (SEC) for “unconstitutional overreach and unfair persecution” of the crypto industry under Gary Gensler’s leadership.
Notably, it was a joint filing led by Russell Coleman, Kentucky’s Attorney General (AG), in a Kentucky district Court. Accordingly, other AGs partnered with AG Coleman to represent West Virginia, Florida, South Carolina, Louisiana, Tennessee, Kansas, Arkansas, Montana, Mississippi, Ohio, Iowa, Missouri, Utah, Texas, Oklahoma, Indiana and Nebraska.
In addition, DeFi Education Fund, a crypto activist organisation, collaborated with the 18 states to sue the SEC.
Eighteen US States Vs a Gensler-chaired SEC
Foremost, the chief complaint was that the US regulator’s enforcement methods on crypto exchanges and firms in the United States were unconstitutional. As stated in the filing, “At bottom, the SEC’s regulatory overreach defies basic principles of federalism and separation of powers.”
For context, Gensler’s stance categorizes most cryptocurrencies as securities, granting the SEC authority to regulate crypto platforms like Coinbase, Kraken, and Ripple. However, this broad interpretation has ignited fierce opposition from state AGs, crypto advocates, and lawmakers who accuse Gensler of regulatory overreach.
Meanwhile, Congress has not provided clear mandates, raising concerns that Gensler is imposing authority not explicitly granted to the SEC.
Furthermore, crypto players argue they are forced to operate in a confusing legal framework, which the AGs have described as “regulatory limbo.” Therefore, the industry’s pushback underscores frustration with inconsistent rules and the lack of a distinct crypto regulatory structure.
Also, SEC lawsuits against major industry players exacerbate uncertainty, discouraging innovation and investment within the U.S. crypto sector. Nonetheless, Gensler defended his actions as necessary to protect investors and ensure compliance with existing securities laws.
It is noteworthy that the lawsuit also cited that the Gensler-chaired restrictions on the US crypto industry were detrimental to a key aspect of the American economy.
Moving On
The direction of the lawsuit remains uncertain as the SEC’s leadership will be overhauled with the incoming administration. In a nutshell, it highlights the crypto industry’s spite of the SEC under Gary Gensler’s steering and a last effort to make it pay for its actions before a leadership change.
The outcome of this case could set a critical precedent for the crypto industry and regulatory oversight in the US.