State attorneys general assert that the SEC exceeded its authority in the Kraken lawsuit.

Eight state attorneys general in the United States have collectively submitted a joint amicus brief, contending that the Securities and Exchange Commission (SEC) has exceeded its authorized powers in the legal dispute involving Kraken, a cryptocurrency exchange.
On February 29, officials from Arkansas, Iowa, Mississippi, Montana, Nebraska, Ohio, South Dakota, and Texas, along with industry lobbyists, filed the brief. The document clarifies that the state officials are not taking sides, but rather they “oppose the SEC’s regulation of crypto assets without an investment contract because this authority has not been delegated to the SEC by Congress.”
The attorneys general argue that the SEC is broadening the definition of an “investment contract” and that states have the authority to prevent any potential violation of state laws, including consumer protection regulations, that could arise from the SEC’s attempt to regulate crypto assets as securities. They stated, “The SEC’s enforcement action exceeds its authorized powers,” and added, “Certain state laws provide greater consumer protection than federal securities laws.”
These actions follow a motion filed by Kraken on February 22, in which the exchange requested the dismissal of the lawsuit filed by the SEC, claiming that the regulator’s overreach sets a “dangerous precedent.” Kraken asserts that the SEC has no clear boundaries and that granting it favor in this lawsuit would give the agency excessive authority.
On the same day, Kraken released a blog post refuting the SEC’s claims that it operates as an unlicensed securities exchange, broker, dealer, and clearing agency. The exchange argues that the SEC’s characterization of crypto tokens as “investment contracts” lacks 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, commingling customer funds, and failing to prevent conflicts of interest.
The SEC has also filed similar complaints against other cryptocurrency-related firms, including Coinbase, Binance, and the US branch of Bittrex, with ongoing cases for the first two.