Breaking: 18 States Sue US SEC For Constitutional Overreach In Crypto Regulation

Eighteen US states have filed a lawsuit against the US SEC, commissioners, and the Chair Gary Gensler, over crypto regulation overreach.
By Teuta Franjkovic
Trump’s Memecoin

Highlights

  • Eighteen US states filed a lawsuit against the SEC and Chair Gary Gensler, alleging unconstitutional overreach in crypto regulation.
  • Speculation grows that SEC Chair Gary Gensler may resign soon.
  • Ex-SEC official John Reed Stark urged Gensler to step down.

Eighteen US states have filed a lawsuit against the Securities and Exchange Commission (SEC), its commissioners, and the SEC Chairman, Gary Gensler, for unconstitutional overreach and unfair persecution of the cryptocurrency industry.

This lawsuit puts into sharp focus a simmering tension between federal regulators and state governments about the proper scope of regulation in the digital asset space.

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18 States Sue US SEC Over Crypto Regulation Overreach

Eighteen US states filed a suit against the Securities and Exchange Commission and its Chair, Gary Gensler, alleging unconstitutional overreach in its crypto regulatory practices.

According to FOX News, the states complained that the SEC’s aggressive enforcement strategy usurps their right to oversee local economic policies. The states further asserted that the actions taken by the agency have disrupted the emerging crypto industry, which is a significant role player in many state economies.

This lawsuit highlights growing tension between federal and state authorities over regulating digital assets in the United States. It also underscores discontent within the crypto sector about excessive and unclear federal interference, as noted by critics.

The plaintiffs include Kentucky, West Virginia, Iowa, Texas, Montana, Nebraska, Tennessee, Wyoming and others.

According to the legal complaint:

“The Securities and Exchange Commission (SEC) has not respected this allocation of authority. Instead, without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions.”

Most notably, the lawsuit alleges that the SEC’s crusade against US-based cryptocurrency companies infringes on the principles of federalism because its actions go beyond constitutional boundaries. Specifically, Gensler argues that most cryptocurrencies constitute a security under the purview of the SEC but have failed to issue any formal rules classifying them.

Kentucky Attorney General Russell Coleman slammed the Biden Administration’s crypto crackdown on ordinary digital market participants as an attack. He joined a legal challenge with other conservative attorneys general, citing his battle to check federal overreach as part of the reason for doing so.

The complaint insists that the SEC’s actions violate states’ rights to regulate their respective economies and, as a result, violate principles of federalism and separation of powers. It alleges that the SEC’s far-reaching jurisdiction is sans congressional authorization, undermines state sovereignty, and attenuates innovation in the regulation of digital assets.

It also argues that applying antiquated federal securities laws to digital assets harms consumers by crowding out superior state-level protections that better suit the crypto market.

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Gary Gensler Faces Resignation Rumors Amid Crypto Backlash

Rumors began to circulate that SEC Chair Gary Gensler could resign as early as tomorrow amidst growing criticism for his regulatory approach toward the cryptocurrency industry.

In prepared remarks for a legal conference last week, Gensler reiterated what he says is “significant investor harm” in the crypto market. He said “the vast majority” of cryptocurrency tokens are deficient in appropriate use cases, reinforcing his stance on strict enforcement.

Speculation that Gensler is on the verge of resigning has only increased since his speech, which included the following parting words: “I’ve been proud to serve with my colleagues at the SEC who, day in and day out, work to protect American families on the highways of finance.”

Former SEC official John Reed Stark has publicly called for SEC Chair Gary Gensler to resign, citing the need for a fresh approach to the agency’s cryptocurrency policy. Stark emphasized that ongoing investigations and regulatory initiatives targeting the crypto industry should be paused to allow for a smoother leadership transition.

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Teuta Franjkovic
Teuta is a seasoned writer and editor with over 15 years of expertise in macroeconomics, technology, and the crypto and blockchain sectors. She began her career in 2005 as a lifestyle writer for *Cosmopolitan* before transitioning to business and economic reporting for renowned outlets like *Forbes* and *Bloomberg*. Inspired by thought leaders like Don and Alex Tapscott and Laura Shin, Teuta embraced blockchain's potential, viewing cryptocurrency as one of humanity's most transformative innovations. Since 2014, she has specialized in fintech, focusing on crypto, blockchain, NFTs, and Web3. Known for her strong collaboration and communication skills, Teuta also holds dual MAs in Political Science and Law.
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