Legal representatives from each state have claimed that the SEC is attempting to take authority that should properly reside with the states.
In its lawsuit against the cryptocurrency exchange Kraken, a coalition of state attorneys general contends that the SEC overstepped its bounds.
On Thursday, along with other players and a number of industry lobbyists, state law enforcement authorities from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas submitted a combined amicus brief, sometimes known as a friend of the court filing, in the SEC’s lawsuit against Kraken.
Using the arguments that cryptocurrencies “are not automatically securities” and that the SEC was broadening the definition of an “investment contract,” the state attorney general said that the agency’s lawsuit might potentially hurt consumers.
According to the document, which shared some points with Kraken and other cryptocurrency firms, the states were not submitting their paperwork in favor of the exchange, but rather against the federal regulator.
The petition said that states should take action to prevent the SEC from trying to regulate cryptocurrency assets as securities, which might lead to the preemption of consumer protection and other state laws. By possibly preempting state legislation better suited to the unique dangers of non-securities products, the SEC’s use of this unassigned power endangers consumers. When compared to federal securities laws, certain state statutes provide more protections for buyers.
According to the application, investment contracts had already been defined more precisely by state court decisions.
The brief said that the SEC may be able to supersede state consumer protection laws and crypto rules if it succeeds in its lawsuit.
Alleging that Kraken does not register as a securities broker, clearinghouse, or trading platform, the SEC filed a lawsuit against the exchange last October. Companies like Bittrex’s U.S. branch, Binance, Coinbase, and others have been the targets of similar SEC complaints. Cases involving Coinbase and Binance/Binance.US are continuing, although Bittrex reached a settlement.
Wallets