Eighteen Republican-led states have filed a federal lawsuit against the Securities and Exchange Commission (SEC) and its Chairman Gary Gensler, challenging the agency’s enforcement actions against the cryptocurrency industry.

BREAKING: 🇺🇸 18 U.S. states are suing the SEC
for “unconstitutional overreach and unfair persecution” of the #crypto industry under Gary Gensler – Fox Business @EleanorTerrett pic.twitter.com/bSNraHenOZ

— Bitcoin Archive (@BTC_Archive) November 14, 2024

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The suit, filed Thursday in a federal court in Kentucky, accuses the SEC of overstepping its authority and violating the U.S. Constitution.

The lawsuit, led by Kentucky Attorney General Russell Coleman and joined by 17 other attorneys general, argues that the SEC has improperly sought to regulate the digital asset industry without Congressional authorization.

The states are joined in the suit by the DeFi Education Fund, a group advocating for decentralized finance.

“Without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions targeting the digital asset industry,” the lawsuit states.

“The SEC’s sweeping assertion of regulatory jurisdiction is untenable.”

The legal filing claims the SEC has intentionally avoided creating formal rules for the cryptocurrency market, instead opting for enforcement actions that amount to what the lawsuit describes as a “regulatory land grab.”

🚨SCOOP: 18 U.S. states have filed to sue the @SECGov and its commissioners, accusing them of unconstitutional overreach and unfair persecution of the #crypto industry under the leadership of agency chief @GaryGensler.

The lawsuit, signed by 18 Republican Attorneys General,… pic.twitter.com/wxOovuIRQH

— Eleanor Terrett (@EleanorTerrett) November 14, 2024

The states argue that these actions bypass established procedures and infringe on state authority.

The plaintiffs have asked the court for declaratory and injunctive relief to effectively halt the SEC’s ability to pursue further lawsuits against cryptocurrency companies.

The suit specifically seeks to bar the SEC from treating transactions involving digital assets as uniformly constituting “investment contracts.”

Attorney General Coleman framed the lawsuit as part of a broader effort to counter federal overreach under the Biden administration. “Instead of encouraging this vibrant new digital industry, the Biden-Harris Administration is unlawfully cracking down on cryptocurrency,” Coleman said in a statement. “Along with conservative AGs across the country, we’re fighting to keep the federal government from reaching into Kentuckians’ wallets—both physical and digital.”

The lawsuit comes at a pivotal moment, as President-elect Donald Trump prepares to take office and is expected to implement significant regulatory changes.

Trump has pledged to support the cryptocurrency industry and is anticipated to appoint a new SEC chair with a pro-crypto stance.

The lawsuit appears aimed at not only curbing the outgoing administration’s regulatory actions but also preempting similar moves under future SEC leadership.

The filing reflects growing tensions between state governments and federal agencies over the regulation of emerging technologies.

The 18 states argue that the SEC’s actions encroach on states’ rights and create uncertainty for businesses and investors in the rapidly evolving digital asset market.

Under Chairman Gensler’s leadership, the SEC has taken an aggressive approach to cryptocurrency enforcement, targeting high-profile platforms and digital asset providers.

Critics, including the attorneys general involved in the suit, argue that this approach stifles innovation and harms a sector poised to drive economic growth.

The lawsuit represents a significant challenge to the SEC’s current regulatory framework for digital assets and sets the stage for broader debates over federal and state authority in regulating emerging industries.

The case now moves to federal court, where a decision could have far-reaching implications for the cryptocurrency market and the regulatory environment surrounding it.