The U.S. Securities and Exchange Commission (SEC) is too tough on crypto, 18 Attorneys General allege in a new lawsuit.

What Happened: AGs from 18 Republican-leaning states joined the DeFi Education Fund to file a lawsuit against the SEC for what they consider overly harsh regulation against digital assets.

The plaintiffs are complaining that the SEC, led by Chairman Gary Gensler, is exceeding its authority in an attempt to regulate the entire cryptocurrency sector.

The lawsuit contends that the SEC's expansive approach lacks Congressional authorization, which would be necessary for it to assume such sweeping control.

Also Read: Pennsylvania Introduces Bitcoin Strategic Reserve Act To Invest Up To $700 Million In BTC

According to the states, the SEC's "regulation by enforcement" strategy has hindered the growth of a sector.

The complaint states, "The SEC's assertion of sweeping jurisdiction without congressional authorization deprives States of their proper sovereign role and chills the development of innovative regulatory frameworks for the digital asset industry."

The lawsuit also challenges the SEC's enforcement actions, alleging that they lack clear standards and impose undue burdens on industry participants.

This has resulted in significant financial harm, with some companies moving operations overseas due to regulatory uncertainty, the plaintiffs argue.

The SEC's regulatory stance “threatens to displace better-suited state laws that have been carefully designed to ensure consumer protection in the digital asset industry,” they added.

The timing of the suit coincides with a growing national conversation on digital asset regulation, especially as Benzinga's Future of Digital Assets conference approaches on Nov. 19, where key industry stakeholders and policymakers will discuss the future of cryptocurrency regulation in the U.S.

The states seek declaratory and injunctive relief, urging a return to a state-led regulatory approach that would foster innovation and protect consumers without overstepping federal boundaries.

Who’s Suing?

The plaintiffs in the lawsuit against the SEC include:

• Kentucky (AG Russell Coleman)
• Nebraska (AG Michael T. Hilgers)
• Tennessee (AG Jonathan Skrmetti)
• West Virginia (AG Patrick Morrisey)
• Iowa (AG Brenna Bird)
• Texas (AG Ken Paxton)
• Mississippi (AG Lynn Fitch)
• Montana (AG Austin Knudsen)
• Arkansas (AG Tim Griffin)
• Ohio (AG David Yost)
• Kansas (AG Kris W. Kobach)
• Missouri (AG Andrew Bailey)
• Indiana (AG Theodore E. Rokita)
• Utah (AG Sean D. Reyes)
• Louisiana (AG Elizabeth B. Murrill)
• South Carolina (AG Alan Wilson)
• Oklahoma (AG Gentner Drummond)
• Florida (AG Ashley Moody)

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Image: Securities and Exchange Commission offices. Photo via Shutterstock.