State Attorneys General Question SEC’s Authority in Kraken Lawsuit
A group of state attorneys general has challenged the U.S. Securities and Exchange Commission’s (SEC) authority in the ongoing lawsuit against the cryptocurrency exchange Kraken.
On Thursday, state law enforcement officials from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas filed a joint amicus brief in the SEC’s suit against Kraken.
They argued that the SEC’s lawsuit could harm consumers and accused the agency of expanding the definition of an “investment contract.” The attorneys general emphasized that cryptocurrencies should not automatically be classified as securities.
The filing says that the states are not supporting the exchange but are opposing the federal regulator.
They expressed concerns about potential preemption of state consumer protection laws and state regulations related to cryptocurrencies.
The attorneys general emphasized 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.
“States have a strong interest in preventing the potential preemption of consumer protection and other state laws by the SEC’s attempt to regulate crypto assets as securities,” the filing said.
The amicus brief warned that if the SEC succeeds in its lawsuit, it could potentially preempt state consumer protection laws and state crypto regulations.
It further argued 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.
Furthermore, some states have adopted regulatory regimes that treat crypto assets as money transmitters.
Many states have implemented statutory and
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