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States and DeFi Group Challenge SEC’s Crypto Oversight
A new lawsuit is taking Gary Gensler's SEC to task on crypto.
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Eighteen Republican attorneys general, joined by the DeFi Education Fund, have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC), challenging the agency’s authority to regulate digital assets at the state level.
What's the Scoop?
- The lawsuit, filed in the U.S. District Court for the Eastern District of Kentucky, names SEC Chair Gary Gensler and the agency’s commissioners as defendants.
- The plaintiffs seek a court declaration that “digital asset transactions are not investment contracts” and an order blocking the SEC from requiring crypto platforms to register as securities exchanges, dealers, or brokers for secondary transactions.
- The complaint argues that the SEC has overstepped its authority by labeling most digital assets as securities and pursuing enforcement actions without clear Congressional authorization.
- The Howey Test, used by the SEC to classify assets as securities, is a central point of contention. The lawsuit claims the SEC misapplies the test, conflating digital assets with investment contracts based on speculative expectations.
Bankless take:
This lawsuit comes as Gary Gensler seems likely to resign ahead of, or in the early days of, the upcoming Trump administration, and it's possible the plaintiffs drop the case once the crypto skeptic departs as chair. We'll see what happens, but the case is notable either way in highlighting the broader tensions that have brewed between some states and Gensler's SEC over crypto in recent years.