Join 250,000+
professionals today

Add Insights to your inbox - get the latest
professional news for free.

States vs. SEC: Crypto ‘Overreach’ Battle Begins

Join our 250K+ subscribers

Join our 250K+ subscribers

Subscribe

18 NOV 2024 / SEC UPDATES

States vs. SEC: Crypto ‘Overreach’ Battle Begins

States vs. SEC: Crypto ‘Overreach’ Battle Begins

Is the SEC Overstepping? In a move that could reshape the future of cryptocurrency in the U.S., 18 states are taking a stand against the Securities and Exchange Commission (SEC) and its Chair, Gary Gensler, filing a lawsuit in the U.S. District Court for the Eastern District of Kentucky, Frankfort Division, and accusing them of "regulatory overreach." Led by Republican Attorneys General from states like Texas, Florida, Kentucky, Nebraska, Alabama, Arkansas, Georgia, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, Oklahoma, South Carolina, South Dakota, Utah and West Virginia, the lawsuit claims the SEC’s aggressive crackdown on crypto is unconstitutional and disrupts local innovation. With federal and state governments now clashing over who calls the shots on crypto, the case raises a pivotal question: Is this the beginning of a more state-led approach to crypto regulation, or will federal authorities tighten their grip?

Why States Are Suing

Leading the charge, Kentucky Attorney General Russell Coleman argues that the SEC’s actions trample on states’ rights and stifle local innovation. According to the lawsuit, these states have set up their own crypto regulations, aiming to protect consumers and their own best interests. But the SEC’s aggressive stance, they claim, is throwing a wrench in the works, undermining local efforts and overstepping federal boundaries. 
This isn’t the first time the SEC’s actions have led to pushback from key players in the crypto industry. What Drove Crypto.com to Take Legal Action Against the SEC? explores another recent clash with the commission.

The Power Struggle: State vs. Federal Control

The states argue they’ve created tailored frameworks that support innovation while protecting consumers—whether by licensing crypto platforms, taxing digital assets, or managing unclaimed crypto property. They believe this local approach has allowed the industry to thrive. But the SEC, favoring centralized oversight, has largely ignored these state-led initiatives, insisting on federal control over an industry that was built on the concept of decentralization.

In the lawsuit, these 18 states emphasize federalism and the separation of powers, claiming the SEC’s approach is unconstitutional. They’re seeking judicial intervention to reel in what they see as federal overreach, stressing that crypto regulation should be a collaborative effort, not a one-size-fits-all crackdown.

Considering the factor of taxation in crypto, let's delve into the course Cryptocurrency Tax Essentials: IRS Ingight on MYCPE ONE for a deeper understanding.

Is Gensler Protecting or Overreaching on Crypto

Gary Gensler, the SEC Chair, argues that most cryptocurrencies (except Bitcoin and Ether) are securities, falling under the SEC’s domain. This viewpoint has fueled lawsuits against big crypto players like Coinbase and Ripple. Gensler has defended his actions, saying, “Court after court has agreed with our efforts to protect investors.”

However, crypto industry advocates, some state governments, and even members of Congress argue that Gensler’s approach lacks clarity, creates a sense of regulatory uncertainty, and risks hampering innovation. The outcome of this lawsuit could reshape the future of crypto regulation in the U.S.

A Pro-Crypto Path Under Trump

The political climate adds another layer of intrigue. With Trump’s administration set to take office, many anticipate a shift in crypto regulation. Although Trump once called crypto a “scam,” he now promises to turn the U.S. into the “crypto capital of the planet,” with plans to roll back what he calls the “war on crypto.” His stance has energized the industry, creating a strong contrast to the SEC’s current approach.

Will This Lawsuit Change the Game? 

The lawsuit underscores a core struggle in U.S. governance—the tug between federal and state powers over who gets to call the shots on regulation. If the states win, it could set a game-changing precedent that limits the SEC’s reach over crypto markets, giving states the freedom to set up their own rules. If the SEC prevails, the industry might face even stricter federal control. While the decentralized approach could drive more innovation, it also risks creating a patchwork of regulations that complicate nationwide compliance and investor protection.

With Bitcoin hitting new highs around $90,000 and the cryptocurrency market projected to reach US$9.8 billion in revenue by 2024, optimism in the crypto space is palpable. Yet, the sector remains under a regulatory microscope. For players in the digital asset world, this lawsuit highlights the need to stay on top of regulatory shifts and prepare for what could be a whole new rulebook. The outcome of this case—along with the incoming administration’s pro-crypto stance—could redefine how digital assets are managed in the U.S.

Until next time…

Don’t forget to share this story on LinkedIn, X and Facebook

📢MYCPE ONE Insights has a newsletter on LinkedIn as well! If you want the sharpest analysis of all accounting and finance news without the jargon, Insights is the place to be! Click Here to Join

Subscribed
Cathy purchased a subscription.
Subscribed
Fred purchased a subscription.
Subscribed
Lance purchased a subscription.
Subscribed
Darren purchased a subscription.
Subscribed
Teresa purchased a subscription.
Subscribed
Kerry purchased a subscription.
Subscribed
Dante purchased a subscription.
Subscribed
Suzanne purchased a subscription.
Subscribed
Kristine Joy purchased a subscription.
Subscribed
Diane purchased a subscription.
Subscribed
Whitley purchased a subscription.
Subscribed
BO YEM purchased a subscription.
Subscribed
Koshy purchased a subscription.
Subscribed
Abby purchased a subscription.
Subscribed
Nolan purchased a subscription.
Subscribed
Jie purchased a subscription.
Subscribed
Paul purchased a subscription.
Subscribed
Marcin purchased a subscription.
Subscribed
Arlon purchased a subscription.
Subscribed
Andrea purchased a subscription.
Subscribed
Mary Ann purchased a subscription.
Subscribed
Mark purchased a subscription.
Subscribed
Shelby purchased a subscription.
Subscribed
Zach purchased a subscription.
Subscribed
Lisa purchased a subscription.
Subscribed
Steven purchased a subscription.
Subscribed
ELLIE purchased a subscription.
Subscribed
Joie purchased a subscription.
Subscribed
Curtis purchased a subscription.
Subscribed
thomas purchased a subscription.
Subscribed
Leilani purchased a subscription.
Subscribed
Dwight purchased a subscription.
Subscribed
Urvish purchased a subscription.
Subscribed
Christina purchased a subscription.
Subscribed
Wilbur purchased a subscription.
Subscribed
SYLVIA purchased a subscription.
Subscribed
Arleen purchased a subscription.
Subscribed
Shaneque purchased a subscription.
Subscribed
Michelle purchased a subscription.
Subscribed
Kelly purchased a subscription.
Subscribed
Marvin purchased a subscription.
Subscribed
Jeff purchased a subscription.
Subscribed
Santi purchased a subscription.
Subscribed
Elfinesh purchased a subscription.
Subscribed
Phuoc Lien purchased a subscription.
Subscribed
Ramy purchased a subscription.
Subscribed
Stephany purchased a subscription.
Subscribed
Kerri purchased a subscription.
Subscribed
Andrey purchased a subscription.
Subscribed
RONALD purchased a subscription.
Subscribed
Suzanne purchased a subscription.
Subscribed
Marie purchased a subscription.
Subscribed
Matthew purchased a subscription.
Subscribed
Agata purchased a subscription.
Subscribed
Ammar purchased a subscription.
Subscribed
Jan purchased a subscription.
Subscribed
Tiffany purchased a subscription.
Subscribed
Yulin purchased a subscription.
Subscribed
Mary E. Mickens purchased a subscription.
Subscribed
Yujin purchased a subscription.
Subscribed
Meenakshi purchased a subscription.
Subscribed
Mary purchased a subscription.
Subscribed
Maaike purchased a subscription.
Subscribed
Kathie purchased a subscription.
Subscribed
Debora purchased a subscription.
Subscribed
Cynthia purchased a subscription.
Subscribed
EDIP purchased a subscription.
Subscribed
Whitney purchased a subscription.
Subscribed
Daniel purchased a subscription.
Subscribed
BELINDA purchased a subscription.
Subscribed
Stephanie purchased a subscription.
Subscribed
Julie purchased a subscription.
Subscribed
Furaha purchased a subscription.
Subscribed
Benedict purchased a subscription.
Subscribed
jonathan purchased a subscription.
Subscribed
Mohamad Anuar purchased a subscription.
Subscribed
Stephen purchased a subscription.
Subscribed
Hatem purchased a subscription.
Subscribed
Terri purchased a subscription.
Subscribed
Kim purchased a subscription.
Subscribed
Renee purchased a subscription.
Subscribed
Jon purchased a subscription.
Subscribed
Craig purchased a subscription.
Subscribed
KAREN purchased a subscription.
Subscribed
Nurain purchased a subscription.
Subscribed
Angie purchased a subscription.
Subscribed
Louventz purchased a subscription.
Subscribed
Cagdas purchased a subscription.
Subscribed
Louie purchased a subscription.
Subscribed
Charlene purchased a subscription.
Subscribed
Cathy Stonebraker purchased a subscription.
Subscribed
Courtney purchased a subscription.
Subscribed
Yanmei purchased a subscription.
Subscribed
Charles purchased a subscription.
Subscribed
Pamela purchased a subscription.
Subscribed
Alyssa purchased a subscription.
Subscribed
Charles purchased a subscription.
Subscribed
KARISHMA purchased a subscription.
Subscribed
Shruti purchased a subscription.
Subscribed
Catrina purchased a subscription.