SEC facing joint lawsuit from 18 US states over ‘unconstitutional persecution’ of crypto

Attorney Generals of 18 US states have filed a joint lawsuit against the Securities and Exchange Commission (SEC), its Commissioners, and Chair Gary Gensler.

The lawsuit accuses the agency of overstepping its constitutional authority by pursuing aggressive regulatory actions against the crypto industry. It further seeks declaratory and injunctive relief to curb what they describe as “unconstitutional persecution” of the crypto sector.

According to a document shared by Fox Business journalist Eleanor Terrett, Kentucky, Texas, Florida, and Nebraska — along with the DeFi Education Fund — are leading the coalition.

The lawsuit argues that state governments have effectively used their regulatory power to foster innovation and protect consumers in crypto. It further contends that several states have created “laboratories for experimentation” by establishing frameworks to support blockchain technology while allowing others to learn from their regulatory efforts.

The collective lawsuit includes Tennessee, West Virginia, Iowa, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, and Oklahoma. Notably, all 18 of the Attorneys General are Republicans.

Unconstitutional crackdown

The complaint highlights various state initiatives, such as requiring digital asset platforms to secure money-transmitter licenses, implementing regulations for digital asset taxation, and offering procedures for managing unclaimed digital property.

According to the lawsuit, these measures provide a transparent regulatory environment tailored to local needs. However, it claims the SEC has disregarded these state-led efforts, instead seeking to impose a federal mandate without Congressional approval.

Additionally, the SEC has allegedly attempted to centralize regulatory control through a series of enforcement actions, which the plaintiffs claim violates the constitutional separation of powers. 

The lawsuit calls for judicial intervention to reaffirm state authority over crypto regulation and prevent further SEC encroachment.