Regulation
Drummond Joins Amicus Curiae Briefing Challenging SEC Cryptocurrency Regulation
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OKLAHOMA CITY — Oklahoma Attorney General Drummond is pushing back against federal regulation of cryptocurrencies.
On Thursday, Drummond announced that he has joined an amicus brief filed by Iowa, along with Arkansas, Indiana, Kansas, Montana, and Nebraska, challenging the Securities and Exchange Commission’s regulation of cryptocurrencies.
According to the memo, the states oppose the SEC regulating cryptocurrencies without an investment agreement because Congress has not delegated that authority to the agency.
“States have a strong interest in preventing the SEC from preempting consumer protection and other state laws in its attempt to regulate cryptocurrencies as securities,” the report reads.
Since the advent of cryptocurrencies, there has been a debate as to whether decentralized digital currency should be considered a security, a currency, or a commodity.
SEC Chairman Gary Gensler classifies cryptocurrency as a security, pointing to the Howey Test, which was established by the ruling in SEC v. W.J. Howey Co. in 1946. The test has four qualifiers: a monetary investment, an expectation of profit, an investment in a joint venture, and a dependence on the efforts of a promoter or third party.
The brief argues that the SEC is ignoring the precepts of the Howey test by treating cryptocurrency as “an investment contract,” and says that the SEC’s regulation threatens to render states powerless to prosecute cryptocurrency fraudsters.
U.S. consumers reported losing more than $4.6 billion to investment scams in 2023, more than any other category, up 21% from the previous year.
The states in the brief argue that the SEC is violating the Administrative Procedure Act and the Major Questions Doctrine. Drummond called the SEC “unelected bureaucrats” who have no authority to bypass Congress.
“This blatant federal interference by the Biden administration will significantly hinder Oklahoma from protecting our citizens from scams,” Drummond said in a statement Thursday. “Furthermore, the SEC’s oversight of cryptocurrency will surely stifle innovation and devastate the growing industry. We will defend and protect our citizens from nefarious scammers, and we do not need the Biden administration playing Big Brother in this regard.”
Storm Rund, president of the Oklahoma Bitcoin Association, said data on the prevalence of these scams in Oklahoma is not readily available, but cryptocurrency scams are rampant, especially on social media.
The association praises Drummond’s efforts to protect Oklahomans and counter what it says is a “pattern of excessive federal interference by the Biden administration, which ignores administrative procedure laws and acts without Congressional guidance.”
Rund said Oklahoma has put itself on the national stage by passing a law like House Bill 3594, which protects an individual’s ability to self-guard their assets and provides industry definitions for future regulation at the state level.
“Oklahoma has recognized the value and importance of protecting innovation, individual rights, and the growing Bitcoin and digital asset industries. We expect this trend to continue,” Rund said in a statement Thursday.
As for how to avoid falling victim to a digital currency scam, Rund recommends avoiding responding to direct messages on social media, text messages, phone calls, or emails from unknown people regarding bitcoin, cryptocurrencies, stablecoins, or any other investment instrument.
“Never share your seed phrase. Never send money to people you don’t know on the Internet. Don’t trust, verify,” Rund said.