According to a recent The Block report, Eighteen Republican attorneys general have sued the U.S. Securities and Exchange Commission (SEC), alleging the agency has exceeded its authority by attempting to regulate digital assets at the state level. The lawsuit, filed in the U.S. District Court for the Eastern District of Kentucky, includes attorneys general from states like Kentucky, Nebraska, Tennessee, and Iowa, along with the DeFi Education Fund.

The suit argues that digital asset transactions are not investment contracts and requests an injunction to stop the SEC from requiring platforms to register as securities exchanges, brokers, or clearing agencies. The attorneys general claim the SEC’s approach undermines state regulatory frameworks that are fostering growth in the crypto industry.

The lawsuit comes amid a bullish shift in the crypto market due to the re-election of former President Donald Trump, who has been seen as an advocate for the industry. Many hope a Trump administration would roll back the “regulation by enforcement” approach crypto firms faced under President Biden.

The plaintiffs also challenge the SEC’s application of the Howey Test, asserting that owning a digital asset doesn’t equate to an investment contract. The SEC, led by Chair Gary Gensler, has yet to respond.

Resources:

The Block