Crypto Regulation Update: Republican States Temporarily Halt Lawsuit Against SEC Regarding Cryptocurrency Jurisdiction
A federal judge has agreed to pause an ongoing lawsuit involving 18 state attorneys general and a decentralized finance lobbyist group against the U.S. Securities and Exchange Commission (SEC) as of Wednesday, following a note on the SEC’s new leadership. The state AGs, all Republicans, filed this lawsuit in collaboration with the DeFi Education Fund last November after Donald Trump’s victory in the 2024 presidential election. They assert that the federal securities regulator has overstepped its authority in taking legal action against crypto exchanges. In a recent filing, the SEC indicated that Paul Atkins’ confirmation as the new chairperson of the agency could potentially lead to a resolution in the litigation.
“As support, the Defendants state that due to a leadership transition in the Securities and Exchange Commission, this case could potentially be resolved,” the filing noted. The judge requested that the parties submit a joint status report within 30 days while suspending all deadlines for 60 days. The initial arguments in the lawsuit claimed that the SEC’s enforcement actions were impeding state regulators’ ability to oversee digital asset firms in their jurisdictions.
“Some States, for example, have enacted regulatory frameworks for financial institutions focusing on digital assets; others have required digital asset platforms to secure money-transmitter licenses and security bonds to ensure liquidity,” the lawsuit elaborated. “While state regulatory approaches have varied according to local needs, they have consistently aimed to provide transparent and manageable rules. Moreover, Congress has repeatedly rejected suggestions to grant federal agencies broad regulatory authority over digital assets.”
Congress is anticipated to revisit market structure legislation that may clarify the roles of federal regulators in the crypto space this year, and significant committees have already begun holding hearings. Meanwhile, the SEC has discontinued investigations and lawsuits involving more than a dozen companies and has paused legal proceedings against several others.
IRS Broker Rule
In a separate development, a lawsuit filed by the DeFi Education Fund, the Texas Blockchain Council, and the Blockchain Association against the Internal Revenue Service was also dropped on Wednesday. This lawsuit contended that the IRS’s DeFi broker rule exceeded the agency’s authority. Trump recently signed a bipartisan House and Senate resolution under the Congressional Review Act to nullify this rule—the first legislative action regarding crypto that he has signed as president. In a filing on Wednesday, the parties stated that the lawsuit had become “moot” following the signing of the resolution.
