Republican AGs Sue SEC Claiming Cryptocurrency Regulatory Overreach

Cozen O'Connor
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  • A group of 18 Republican AGs, joined by a nonpartisan policy group, have filed a lawsuit contesting the SEC’s enforcement authority over digital assets, including cryptocurrency.
  • In the complaint, the coalition alleges that the SEC has exceeded its statutory authority by treating most cryptocurrency transactions as “investment contracts” subject to securities regulation. The AGs argue that cryptocurrencies are digital assets, not investment contracts, and assert that the SEC’s enforcement actions against cryptocurrency companies constitute an abuse of discretion, violate states’ regulatory primacy, and breach procedural requirements under the Administrative Procedure Act.
  • The coalition seeks a declaration that digital assets are not investment contracts subject to SEC enforcement and an injunction preventing the SEC from taking enforcement action against digital asset platforms that do not register as securities dealers. Additionally, the states are requesting a declaration that the SEC violated the Administrative Procedure Act by failing to subject its regulation of digital asset platforms to notice-and-comment rulemaking. The lawsuit also seeks damages, as well as recovery of costs and attorneys’ fees.
  • We previously reported on 7 Republican AGs filing an amicus brief in a separate case in which the AGs made a similar argument that the SEC lacks authority to regulate cryptocurrencies as securities and has overstepped by using enforcement actions instead of rulemaking.

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