Dispute Arises from SEC Lawsuit against Kraken, State Officials Accuse SEC of Serious Overreach

The state attorney general stated that the lawsuit from the SEC could potentially harm consumers, and believes that the SEC is expanding the definition of "investment contracts" to automatically classify cryptocurrencies as securities.

States Unite to Accuse SEC of Overstepping in Lawsuit Against Kraken

According to CoinDesk, officials from multiple U.S. states have jointly filed an amicus brief in the SEC's lawsuit against Kraken, including industry lobbyists and state law enforcement officials from:

• Texas

• Montana

• Arkansas

• Iowa

• Ohio

• South Dakota

• Mississippi

• Nebraska

Crypto industry lobbyists include organizations such as the Digital Chamber of Commerce, Blockchain Association, and DeFi Education Fund.

The state attorneys general state that the SEC's lawsuit could potentially harm consumers, as the SEC is expanding the definition of "investment contract" to automatically classify cryptocurrencies as securities.

SEC Stripping States of Jurisdiction

The brief emphasizes that the states' filing is not in support of Kraken, but rather in opposition to the SEC.

The brief states:

States strongly oppose the SEC's attempt to classify crypto assets as securities, as the SEC's exercise of unauthorized power could expose consumers to risk. This could lead future similar cases to be subject to federal law, which may not be as suitable for specific risks of non-securities products as state law, and state laws are better suited to protect consumer interests.

The brief emphasizes that past state cases have helped clarify the definition of investment contracts.

Aside from accusing Kraken of listing 11 unregistered securities, the SEC also accuses Kraken of commingling user and company funds.

Last week, Kraken filed a motion to dismiss, arguing that the SEC has failed to reasonably allege its claims and has overstepped, similar to arguments previously made by Coinbase and Binance.

Kraken Faces SEC Charges Again: Accused of Commingling Funds, Listing Numerous Unregistered Securities