SEC Chair Gensler hints at exit; 18 states sue over crypto crackdown.

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Just as SEC Chair Gary Gensler hinted he might step down, a wave of legal action followed: 18 states filed a lawsuit against the SEC, accusing the agency of overreach and unfair targeting of the cryptocurrency industry. This lawsuit marks a pivotal moment in the ongoing clash between federal regulators and the fast-growing crypto sector.

In a speech at the Practising Law Institute’s Annual Institute on Securities Regulation, Gensler discussed his accomplishments and hinted at his potential resignation. He spoke about the SEC’s work in U.S. Treasury and equity markets, as well as the tightening grip on crypto, acknowledging the difficulties in regulating emerging technologies like blockchain. However, just minutes after this statement, 18 states launched a suit against him and the SEC, spotlighting alleged unconstitutional actions under his leadership.

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The 18 states—led by attorneys general from states like Kentucky, Texas, Ohio, and Florida—claim that the SEC’s actions infringe upon federalism and stifle innovation. This coalition argues that the SEC’s broad crackdown on U.S. crypto businesses is hurting an industry valued at an estimated $3 trillion, potentially compromising economic growth and technological advancement.

The lawsuit, filed in Kentucky, has received support from the DeFi Education Fund, a crypto advocacy group. They assert that the SEC’s enforcement-heavy approach disrupts the principles of innovation and market freedom, challenging the notion that federal authorities can unilaterally impose restrictions on new technologies.

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With Gensler’s tenure under scrutiny, this case could reshape the relationship between crypto and regulation. If these states succeed, it might pave the way for more tailored oversight in the sector, limiting federal control and encouraging a more open approach to financial innovation.

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