The Attorney General of Iowa, Brenna Bird, said that the US Securities and Exchange Commission (SEC) was going too far when it tried to regulate the cryptocurrency business. In an amicus statement that explains their case, the attorneys general of Arkansas, Indiana, Kansas, Montana, Nebraska, and Oklahoma back up Bird’s claims.
The brief says that the SEC’s actions as a regulator are a “power grab” that stops new ideas from coming up in the growing bitcoin market. According to the Howey test, which states that an investment must be in a joint venture where profits only come from other people’s labor, the majority of cryptocurrencies don’t meet the requirements for an investment contract. The document also says that the SEC’s approach might weaken state rules that are needed to protect consumers properly.
Coalition Challenges SEC Authority
“The Biden SEC is trying to prevent states like Iowa from doing their job to hold robbers to the law and protect families from the dangers of cryptocurrency scams, Attorney General Bird said in a statement
The group that supports Bird’s brief brings up constitutional problems by using the Major Questions Doctrine and federalism principles. They say that the SEC doesn’t have explicit permission from Congress to regulate a multi-trillion-dollar business like cryptocurrency.
“The SEC’s attempt to regulate cryptocurrencies without proper congressional authorization is a direct threat to state authority and consumer safety,” the brief said.
A group of people say that the SEC’s plan to regulate through court cases instead of making broad laws is incorrect and goes against the Administrative Procedure Act (APA). There is a short part that talks about how the SEC has gone after bitcoin companies in the past. In SEC v. SafeMoon LLC, the SEC said that SafeMoon’s ticket was an asset because its value changed. The alliance is worried that this could mean the SEC can regulate any good whose value changes, not just cryptocurrencies.
“The Biden SEC is attempting to abuse its power and put itself in charge of regulating cryptocurrency, bypassing state consumer protection laws, the brief said.
The filing also says that the SEC’s decision to label some cryptocurrencies as securities is wrong because most of them don’t meet the Supreme Court’s Howey test standards. This standard calls for investing in a group business that only makes money from other people’s work.
“This grab for power will also hurt the free market and give the SEC an unchecked way to regulate the cryptocurrency industry,” Bird said.
The SEC had not replied to the filing as of the time of release. As early as February 2024, Attorney General Bird joined other states in questioning the SEC’s power in its case against Kraken. They asked the court to reject the SEC’s stock claims.
“The court should not rule that crypto assets are securities if they don’t come with an investment contract.” They said that the SEC’s unrestricted power puts consumers in the state at risk by going against state rules that are better suited to the risks of non-security goods.
