18 GOP-led states take legal action against SEC’s crypto crackdown

[Simone Del Rosario]

A group of Republican-led states is suing the Securities and Exchange Commission for constitutional overreach when it comes to cryptocurrency. 

Donald Trump: Hello, Bitcoiners.

Simone Del Rosario: The agency and current SEC chair Gary Gensler have been a target of President-elect Donald Trump and other Republicans, especially since Trump’s embrace of crypto on the campaign trail this year. 

Donald Trump: On day one I will fire Gary Gensler. Whoa! I will appoint a new SEC chairman who believes America should build the future, not block the future, which is what they’re doing.

Simone Del Rosario: In a lawsuit, attorneys general from 18 states led by Kentucky say the SEC isn’t just blocking the future, it’s blocking states’ rights. 

“…the SEC’s regulatory overreach defies basic principles of federalism and separation of powers,” the lawsuit argues, saying, “without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions…” 

The lawsuit argues states have a “constitutional role as ‘laboratories for experimentation to devise various solutions’ for government oversight of the digital asset industry, allowing other States and the federal government to learn from their experiences.”

Gary Gensler: Court after court has agreed with our actions to protect investors and rejected all arguments that the SEC cannot enforce the law when securities are being offered, whatever they’re for.

Simone Del Rosario: While the SEC says it won’t comment on the lawsuit, Chair Gary Gensler defended the agency’s actions in a speech the same day the lawsuit was filed. 

And not just the actions the agency’s taken since he took the chair in 2021. 

Gary Gensler: Jay had already brought some 80 actions in the crypto field, including on his last week in office.

Simone Del Rosario: Jay Clayton was Trump’s pick for SEC Chair for Trump’s first term. This time around, Trump has nominated Clayton for U.S. Attorney for the Southern District of New York. 

Gary Gensler: Everything we’ve done is focused on ensuring compliance with their laws. What we’ve found since the 1930s is that compliance really matters. It protects investors. It builds trust in our capital markets. It helps issuers tap into our markets. And history has shown for 90 years that robust securities regulation both creates trust in our markets, but guess what? It also fosters innovation.

Simone Del Rosario: Well that’s one area where Republican states and the SEC don’t see eye to eye. The lawsuit argues that while the development of blockchain technology has encouraged innovation, trying to hammer “the square peg of the burgeoning digital asset industry into the round hole of the SEC’s existing regulatory regime could wipe out many new digital asset creators and prevent startups from entering the market altogether, suppressing competition and technological innovation.”

The SEC does not consider Bitcoin, Ethereum and stable coins as securities. 

Gary Gensler: Our focus, rather, has been on some of the 10,000 or so other digital assets, many of which courts have ruled, were offered or sold as securities. 

Simone Del Rosario: As Gensler noted, courts have largely struck down previous challenges claiming SEC “overreach.” Regardless of this lawsuit’s fate, the crypto industry does expect a far more favorable environment under Trump 2.0. For SAN, I’m SDR.