Eighteen U.S. states have filed a lawsuit against the Securities and Exchange Commission (SEC) and its commissioners, including Chair Gary Gensler, alleging “unconstitutional overreach” and “unfair persecution” of the cryptocurrency industry.

The lawsuit contends that the SEC’s enforcement actions infringe upon states’ rights to regulate digital assets and exceed the agency’s statutory authority.

Led by Kentucky Attorney General Russell Coleman, the coalition includes attorneys general from Florida, Texas, Nebraska, Tennessee, West Virginia, Iowa, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, and Oklahoma. The DeFi Education Fund, a crypto advocacy group, has joined as a co-plaintiff.

The lawsuit argues that the SEC’s actions violate federalism principles by attempting to “unilaterally wrest regulatory authority away from the States.”

It also invokes the “major questions doctrine,” asserting that the SEC should not litigate against the crypto industry without explicit Congressional approval.

However, this argument has been previously rejected in cases involving Terraform Labs and Coinbase.

Under Chair Gensler, the SEC has intensified its scrutiny of the cryptocurrency sector, initiating numerous enforcement actions against various crypto entities.

This approach has faced criticism from industry stakeholders and political figures, including President-elect Donald Trump, who have accused the SEC of stifling innovation and overstepping its regulatory bounds.

The outcome of this lawsuit could significantly impact the regulatory landscape for digital assets in the United States, potentially redefining the balance of power between federal and state authorities in overseeing the burgeoning crypto industry.

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