A group of eight U.S. state attorneys general filed a joint amicus brief on Thursday. Attorneys general say the SEC’s enforcement action against cryptocurrency exchange Kraken exceeds its delegated powers. State attorneys general argue that the SEC is trying to claim jurisdiction that legally belongs to the states.
State attorneys general: SEC overstepped its authority against cryptocurrency exchanges!
cryptokoin.comAs you follow from , the SEC filed a lawsuit against the cryptocurrency exchange Kraken. In a latest development, a group of state attorneys general is claiming that the SEC has overstepped its authority. State law enforcement officials from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota and Texas filed a joint amicus brief along with a number of industry lobbyists and other participants in the SEC’s lawsuit against Kraken on Thursday.
State AGs say the SEC’s lawsuit is even likely to harm consumers. Accordingly, they state that the agency has expanded the definition of “investment contract.” They also note that cryptocurrencies “are not automatically securities.” The filing, which echoes some of Kraken’s own arguments as well as those of other crypto companies, says the states are filing against the federal regulator, not in support of the exchange. In this context, they underline the following points:
States have a strong interest in preventing consumer protection and other state laws from potentially being circumvented by the SEC’s attempt to regulate crypto assets as securities. …The SEC’s exercise of this undelegated authority puts consumers at risk by potentially precluding state statutes better tailored to the particular risks of non-securities products. Some state laws protect consumers more than federal securities laws.
SEC filed a lawsuit against many cryptocurrency platforms
State cases have helped clarify the definition of investment contracts in the past, attorneys general say in the filing. The filing notes that if the SEC wins the case, it would preempt state consumer protection laws as well as state regulations regarding cryptocurrency.
The SEC sued Kraken last fall. In that case, he alleged that the exchange failed to register as a securities broker and clearing house. The SEC has similar lawsuits filed against companies such as Coinbase, Binance, and the US branch of Bittrex. Meanwhile, Bittrex reached an agreement. However, the Coinbase and Binance/Binance.US lawsuits are ongoing.
Kraken filed a motion to dismiss the lawsuit
Unlike those other cases, the SEC argued that Kraken was clearly involved in the launch of 11 different crypto assets that the exchange said it listed as unregistered securities. The SEC also alleged that Kraken commingled customer and company funds.
Kraken said last week that it “could not plausibly assert” the SEC’s claims. He also suggested that Coinbase and Binance overstepped their bounds with arguments similar to those they made. So, Kraken filed a motion to dismiss the case. The case saw a flurry of amicus briefs on Wednesday and Thursday from industry groups such as the Chamber of Digital Commerce, Blockchain Association and DeFi Education Fund. U.S. Sen. Cynthia Lummis (R-Wyo.) also filed a brief similar to the one her office filed in the SEC’s lawsuit against Coinbase.
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