SEC Under Fire as 18 US States Files Lawsuit, Citing Regulatory Overreach

The Securities and Exchange Commission (SEC) has come under heavy scrutiny following a hefty lawsuit filed against the agency by 18 states in the US. The lawsuit accused the agency and its chair, Gary Gensler of gross misconduct and overreach in the crypto industry.

Notably, this comes amid a growing rumor of Gensler exiting office as early as today, November 15. The SEC under Gensler has had a chokehold over the crypto industry, charging leading companies like Binance, Coinbase, and Ripple to court for alleged violations. However, things look to take a different turn.

18 States Sues Gensler and the SEC

On Thursday morning, 18 Republican states charged the SEC and five of its commissioners for unfair prosecution of the fast-growing crypto industry and also over unconstitutional overreach. They accuse the SEC of stifling the $3 trillion industry, leading to the exit of major firms from the country.

The jointly filed lawsuit in a Kentucky district court was led by Attorney General Russell Coleman. Other plaintiffs include Republican attorneys from Nebraska, Tennessee, West Virginia, Iowa, Texas, Mississippi, Montana, Arkansas, Ohio, Kansas, Missouri, Indiana, Utah, Louisiana, South Carolina, Oklahoma, and Florida

Additionally, DeFi Education Fund, a cryptocurrency advocacy group, collaborated in filing the suit against the agency.

The lawsuit emphasized the blatant disrespect of authority by the SEC, stressing that the Commission has solely taken regulatory powers away from states.

“The Securities and Exchange Commission (SEC) has not respected this allocation of authority. Instead, without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions,” the lawsuit stated.

SEC Litigations Cost Crypto Industry $426 Million

Furthermore, the lawsuit stated that the SEC has restricted and penalized the crypto industry without a clear regulatory framework.

According to a report by the Blockchain Association, the SEC crypto litigations have cost the industry about $426 million since 2021 when its notoriety began. It has also stifled and posed a heavy risk to one of the fastest-growing sectors in the US economy.

Under Gensler, the SEC has gone after big names in the US crypto industry including Binance, Coinbase, Kraken, and Ripple. The agency accused these giants of violating federal security laws even though there have been vague explanations as to what constitutes securities.

Particularly in the case against Ripple, the agency swallowed a giant loss after the presiding Judge Analisa Torres declared that XRP in itself is not a security and that the secondary sales of the token do not constitute security.

However, the SEC chose to challenge this ruling by filing a notice of appeal thereby potentially extending the case conclusion to 2026.

Meanwhile, the newly elected President, Donald Trump has promised to fire Gensler upon taking office and bring about a new pro-crypto regime.