A group of state attorneys general claims the U.S. Securities and Exchange Commission exceeded its authority in suing cryptocurrency exchange Kraken.
State law enforcement officials from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota and Texas joined a number of industry lobbyists and others in joint court Thursday in the SEC's lawsuit against Kraken. A preliminary document (court filing friend) was submitted. other participants.
Noting that the SEC's lawsuit could even harm consumers, the state auditor's office argued that the SEC has expanded the definition of an “investment contract” and that virtual currency is “not automatically a security.”
The filing reflects some of Kraken's own arguments, as well as those of other crypto companies, that states are not filing in favor of exchanges, but rather in opposition to federal regulators. He said he is applying.
“States have a strong interest in preventing the potential preemption of consumer protection and other state laws by the SEC’s attempts to regulate crypto assets as securities,” the filing states. ing. “…the exercise of this undelegated authority by the SEC puts consumers at risk because it may preempt state laws tailored to the specific risks of non-securities products. provides more protection for consumers than federal securities laws.”
State lawsuits have helped clarify the definition of investment contracts in the past, according to filings.
If the SEC wins the lawsuit, it could pre-empt state consumer protection laws and state regulations regarding virtual currencies, according to the filing.
The SEC sued Kraken last fall, alleging that the exchange was not registered as a securities broker, clearinghouse or trading platform. This is a similar complaint the SEC has filed against companies such as Coinbase, Binance, and the U.S. branch of Bittrex. Although Bittrex has settled, the Coinbase and Binance/Binance.US lawsuit continues.
Unlike other lawsuits, the SEC alleged that Kraken was clearly involved in promoting 11 digital assets that the exchange listed as unregistered securities. The SEC also alleged that Kraken commingled customer and company funds.
Kraken files motion Last week, the SEC rejected that claim, saying it failed to make a “plausible argument” and overstepped its bounds. This is a similar claim made by Coinbase and Binance.
The case received a flurry of court briefs on Wednesday and Thursday from industry groups including the Digital Chamber of Commerce, the Blockchain Association, and the DeFi Education Fund.
U.S. Sen. Cynthia Lummis (R-Wyo.) filed a similar brief. One of the files in her office In the SEC's lawsuit against Coinbase.
