AG Reyes and a Coalition of States Fight Against Crypto Regulatory Overreach

SALT LAKE CITY-Utah Attorney General Sean D. Reyes, the outgoing chairman of the national Republican Attorneys General Association (RAGA), helped rally and lead a coalition of 18 states to challenge the Securities Exchange Commission's (SEC) attempt to exclusively regulate most cryptocurrencies with enforcement policies that may contradict state crypto statutes.

General Reyes and the coalition of state AGs contend the SEC is overstepping its constitutional authority, acting without Congressional consent, abusively targeting the crypto industry, and preventing states like Utah from exercising sovereign power to enforce laws more effective in protecting citizens and allowing innovation and more adaptable to the rapidly changing industry than SEC regulations.

"The SEC is drastically and illegally overstepping its limited authority by enforcing out-of-date legal theories in a desperate attempt to suppress the trillion-dollar digital asset industry," said Attorney General Sean D. Reyes. "The desire to prevent misuse of crypto is understandable. But there are ways to do that constitutionally. There are approaches states like Utah have taken to balance blockchain growth and safeguards. The SEC's attempt to regulate most digital assets into oblivion is wholly improper."

General Reyes continues, "Utah has been a beacon of innovation and home to many crypto leaders. Utahns of diverse backgrounds have found financial freedom and asset protection through digital currency. Instead of encouraging this vibrant new digital industry, the current administration is unlawfully cracking down on cryptocurrency to the detriment of our liberty and economic prosperity.

"SEC Chair Gensler points to court decisions he says validate his agency's regulation of securities. But he's missing the whole point. If these digital assets are not securities to begin with, he has no enforcement authority."

The recent development of blockchain technology and its potential to encourage innovation, create jobs, and make financial services more easily available to everyday citizens. Understanding these benefits and balancing other interests, states like Utah have encouraged the responsible growth of this emerging sector while also protecting consumers.

Given his technology and venture background, AG Reyes has long been an advocate for balanced and careful policies that foster innovation, including in the blockchain arena, while also adopting safeguards to vigorously protect consumers and citizens generally. AG Reyes has been a vocal leader nationally and among his AG colleagues for allowing states to find the proper balance of empowering growth and protections in the crypto space until Congress passes uniform laws that build upon the discoveries at the state level.

As Attorney General Reyes has publicly championed for many years: by taking the regulatory lead in this rapidly changing area, States are fulfilling their constitutional role as "laboratories for experimentation to devise various solutions" for government oversight of the digital asset industry, allowing other States and the federal government to learn from their experiences. United States v. Lopez, 514 U.S. 549, 581 (1995) (Kennedy, J., concurring).

In their pleadings, the States argue that the federal government's approach to regulation of blockchain technology is unconstitutional and unlawful for several reasons. The coalition highlights that the digital assets within this industry are not investment contracts, that Congress never empowered the SEC to regulate these platforms, that the SEC has not issued a legally binding rule for its efforts to regulate through the proper process, and that the federal government does not have the authority to usurp the states' control over these matters.

In filing this suit on behalf of the State of Utah, the Attorney General's Office does not represent the Utah Division of Securities, which administers civil securities regulation and enforcement under state law.

Joining Utah and Kentucky on the complaint were the States of Nebraska, Tennessee, West Virginia, Iowa, Texas, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Louisiana, South Carolina, Oklahoma, and Florida. DeFi Education Fund also signed on to the filing.

Read the complaint here.