A coalition of state attorneys general has challenged the U.S. Securities and Exchange Commission (SEC), arguing that the federal regulator overstepped its jurisdiction in its lawsuit against cryptocurrency exchange Kraken.
State Attorneys General Say SEC Exceeded Its Authority in Kraken Case
Law enforcement officials from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas jointly issued a statement opposing the SEC's legal action targeting Kraken.
This regulatory intervention, backed by industry lobbyists and other stakeholders, underscores a growing contention surrounding regulatory oversight of cryptocurrencies.
Expressing concern that the lawsuit filed by the SEC could potentially harm consumers, state attorneys general argued that the agency's interpretation of “investment contract” was overly broad.
They opposed the SEC's attempt to expand regulation, emphasizing that cryptocurrencies should not automatically be classified as securities.
Echoing arguments previously made by Kraken and other industry players, the lawsuit brief underscored states' opposition to the SEC's regulatory overreach rather than overt support for the exchange.
Drawing attention to the importance of protecting consumer protection laws at the state level, the application emphasized that state statutes generally provide special safeguards that are superior to federal securities laws.
According to the filing, state-level legal precedents have historically played an important role in defining investment contracts and have contributed to regulatory clarity in the cryptocurrency space.
However, state attorneys general have warned that there could be serious consequences if the SEC prevails in its lawsuit against Kraken, arguing that such a victory could potentially weaken government regulations and consumer protections in the crypto industry.
*This is not investment advice.