A Group of State Attorneys General Challenges SEC’s Authority in Kraken Lawsuit
A group of state attorneys general has filed a joint amicus brief in the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange Kraken. The attorneys general from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas argue that the SEC’s lawsuit could harm consumers and expand the definition of an “investment contract.” They emphasize that cryptocurrencies should not automatically be classified as securities.
States Oppose SEC’s Enforcement Action
The states clarify that they are not supporting Kraken but opposing the federal regulator. They express concerns about potential preemption of state consumer protection laws and state regulations related to cryptocurrencies. The attorneys general highlight that some state laws offer better consumer protection than federal securities laws and that the SEC’s exercise of undelegated authority puts consumers at risk. They argue that “investment contracts” under the Securities Act and the Exchange Act are not meant to serve as general consumer protection statutes covering all asset purchases.
- The states are not supporting Kraken but opposing the SEC.
- They are concerned about potential preemption of state consumer protection laws and state crypto regulations.
- Some state laws offer better consumer protection than federal securities laws.
- “Investment contracts” should not cover all asset purchases.
Industry Leaders Support Kraken
The case has attracted attention from industry groups such as the Chamber of Digital Commerce, the Blockchain Association, and the DeFi Education Fund. These groups have filed amicus briefs in support of Kraken. U.S. Senator Cynthia Lummis (R-Wyo.) has also filed a brief echoing the stance taken in the SEC’s lawsuit against Coinbase. She criticizes the agency for relying on a “ruling by enforcement” strategy, which harms consumers and lacks clear justification.
- Industry groups like the Chamber of Digital Commerce support Kraken.
- U.S. Senator Cynthia Lummis criticizes the SEC’s “ruling by enforcement” strategy.
SEC’s Lawsuit Against Kraken
The SEC filed a lawsuit against Kraken last year, alleging that the exchange had failed to register as a securities broker, clearinghouse, or trading platform. Similar complaints have been brought by the SEC against other companies like Coinbase and Binance. Kraken has recently filed a motion to dismiss the SEC’s allegations, arguing that the agency lacks plausible evidence and has overreached its bounds.
Hot Take: State Attorneys General Challenge SEC’s Authority in Kraken Lawsuit
A group of state attorneys general has challenged the SEC’s authority in the ongoing lawsuit against Kraken. They argue that the SEC’s lawsuit could harm consumers and expand the definition of an “investment contract.” The attorneys general emphasize that cryptocurrencies should not automatically be classified as securities. The states oppose the SEC’s enforcement action and express concerns about potential preemption of state consumer protection laws and state crypto regulations. Industry leaders, including the Chamber of Digital Commerce, support Kraken, while U.S. Senator Cynthia Lummis criticizes the SEC’s “ruling by enforcement” strategy. The case highlights the ongoing debate surrounding cryptocurrency regulation and the role of federal and state authorities.
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