Attorney General Ken Paxton, along with a coalition of 18 states, has initiated legal action against the U.S. Securities and Exchange Commission (SEC) and members of the Biden-Harris Administration. The lawsuit challenges new regulations imposed on cryptocurrency markets, which Paxton argues were established without legal authority.
The contested regulations require digital asset platforms to register with the SEC as securities exchanges, dealers, brokers, and clearinghouses. These rules also demand compliance with federal securities laws, despite cryptocurrencies not being explicitly mentioned in existing statutory texts. The SEC defends its actions by citing the Securities Act of 1933 and the Exchange Act of 1934. However, these laws were enacted long before the advent of digital assets like cryptocurrencies and do not grant federal agencies the power to override state legislation on this matter.
"Federal bureaucrats in Washington have no authority to dictate to States how they should interact with cryptocurrency nor do they have the power to crush this new field with a regulatory framework that Congress never intended," stated Attorney General Paxton.
The legal filing argues that the SEC's actions undermine the constitutional balance of power by preventing states from creating their own digital asset regulations based on local policy priorities. It claims that such overreach deprives states of their sovereign role and hinders innovative regulatory approaches within the digital asset industry. Moreover, it suggests that by applying unsuitable federal securities laws to digital assets, the SEC is inadvertently harming consumers by displacing more appropriate state-level protections.