An amicus brief filed by Iowa Attorney General Brenna Bird argues that the United States Securities and Exchange Commission (SEC) is exceeding its authority in regulating the cryptocurrency sector.
The amicus brief, supported by the attorneys general of Arkansas, Indiana, Kansas, Montana, Nebraska, and Oklahoma, argues that the SEC’s regulatory actions are overstepping its authority and stifling innovation in the cryptocurrency sector. The brief cautions that the SEC’s approach could override state laws that are essential for protecting consumers. Iowa Attorney General Brenna Bird stated:
“The Biden SEC is trying to prevent states like Iowa from fulfilling their role in enforcing the law and safeguarding families from cryptocurrency scams.”
The coalition raises constitutional concerns, invoking the Major Questions Doctrine and principles of federalism, arguing that regulating a multi-trillion-dollar industry like cryptocurrency requires explicit congressional authorization, which the SEC does not have.
“The SEC’s attempt to regulate cryptocurrencies without proper congressional authorization threatens state authority and consumer safety,” the brief asserts.
The coalition also criticizes the SEC’s reliance on enforcement actions rather than creating legislative frameworks, alleging violations of the Administrative Procedure Act (APA). They point to the SEC’s enforcement history, including the SEC v. SafeMoon LLC case, where the SEC classified SafeMoon’s token as a security based on its price fluctuations. The brief warns that this precedent could allow the SEC to regulate any commodity with fluctuating value, not just cryptocurrencies.
“The Biden SEC is overstepping its authority and trying to regulate cryptocurrency while bypassing state consumer-protection laws,” the brief concludes.
The filing argues that most cryptocurrencies do not meet the investment contract criteria defined by the Supreme Court’s Howey test, which requires investment in a common enterprise with profits derived solely from the efforts of others.
“This power grab will harm the free market and allow the SEC to control the cryptocurrency industry without accountability,” Attorney General Bird stated.
As of publication, the SEC had not responded to the filing.
In February 2024, Attorney General Bird, along with other states, criticized the SEC for exceeding its authority in its case against Kraken. The joint statement urged the court to reject the SEC’s securities claims, asserting:
“The court should not categorize crypto assets as securities without an investment contract. The SEC’s overreach risks state consumers by overriding state statutes better suited to address the specific risks of non-securities products.”
