A group of attorneys filed a lawsuit against the SEC on behalf of some US states, denying it the power to file a suit against the crypto exchange Kraken.
Parties were represented by the states of Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota, and Texas. They maintained that if the agency hands out certificates for the coins as securities by default, it becomes a harmful process for consumers.
However, state officials didn’t argue that Kraken is sponsoring this; rather, they expressed their worries about the licensing and regulations of crypto. They argued some states’ policies may render stronger protections than even the comprehensive federal securities laws, as cryptocurrency is yet to mature.
The briefing cautioned that the SEC’s ruling in its Kraken lawsuit could preempt important state laws governing digital assets. It comes as the SEC sued Kraken in 2022 for allegedly operating an unregistered exchange service amid similar suits against firms like Coinbase and Binance.
Kraken contends its platform enables legal commodity and currency trading rather than securities. The company recently moved to dismiss the SEC’s complaint altogether, asserting the agency both lacks evidence and overreaches its authority.
The states agreed that not all cryptocurrencies constitute securities by default, highlighting the need for regulatory clarity. Their filing echoes crypto industry groups who’ve also submitted briefs supporting Kraken’s stance. Senator Lummis also accused the SEC of justifying crypto enforcement without explaining how securities laws apply, introducing compliance uncertainty.
As the SEC seeks expanded crypto oversight, the states and industry players argue it has yet to justify imposing expansive securities rules on digital asset trading.
Also Read: Kraken Joins Other Exchanges in Fight Against SEC Lawsuit
