State attorneys general contend that the SEC went beyond its jurisdiction in the Kraken lawsuit.

Eight state attorneys general in the United States have collectively submitted an amicus brief arguing that the Securities and Exchange Commission (SEC) has exceeded its authority in the lawsuit against cryptocurrency exchange Kraken.
The brief, filed on February 29, was endorsed by officials from Arkansas, Iowa, Mississippi, Montana, Nebraska, Ohio, South Dakota, and Texas, as well as industry lobbyists. The state officials stated that their opposition to the SEC’s regulation of crypto assets without an investment contract is due to the fact that Congress has not granted the SEC this authority.
The attorneys general contend that the SEC is broadening the definition of an “investment contract,” and that it is the responsibility of the states to prevent any potential breach of state laws, including consumer protection laws, that may result from the SEC’s attempt to regulate crypto assets as securities. They argued, “The SEC’s enforcement action exceeds its delegated powers. Some state laws provide greater consumer protection than federal securities laws.”
This development follows a motion filed by Kraken on February 22, in which the exchange requested the dismissal of the SEC’s lawsuit, citing similar concerns about the regulator’s overreach. Kraken claimed that the SEC lacks a limiting principle and that granting the agency favor in this lawsuit would grant it excessive authority.
In response to the SEC’s claims that Kraken operates as an unlicensed securities exchange, broker, dealer, and clearing agency, the cryptocurrency exchange released a blog post on the same day, asserting that the SEC’s argument is flawed as it fails to provide evidence of any actual contracts between customers and the exchange.
In November, the SEC filed a lawsuit against Kraken, alleging that the exchange was operating without registration, mingling client funds, and failing to prevent conflicts of interest.
The SEC has also lodged similar complaints against other crypto-related firms, including Coinbase, Binance, and the US branch of Bittrex, with ongoing cases involving the first two.