OKLAHOMA CITY — Oklahoma Attorney General Drummond is pushing back against federal regulation on cryptocurrencies.
Drummond announced Thursday he has joined an Iowa-led amicus brief with Arkansas, Indiana, Kansas, Montana and Nebraska challenging the Securities and Exchange Commission’s regulation of cryptocurrencies.
According to the brief, the states oppose the SEC’s regulation of cryptocurrency assets absent an investment contract, as Congress has not delegated that authority to the agency.
“States have a strong interest in preventing preemption of state consumer protection and other laws by SEC’s attempt to regulate crypto as securities,” the brief reads.
Since the emergence of cryptocurrency, it’s been debated if decentralized digital currency should be considered a security, currency or commodity.
SEC Chair Gary Gensler categorizes cryptocurrency as a security, pointing to the Howey Test, which was established through the ruling in SEC v. W.J. Howey Co. in 1946. The test has four qualifiers: A monetary investment, expectation of profit, investment in a common enterprise and a dependence on the efforts of a promoter or third party.
The brief argues the SEC ignores the precepts of the Howey Test, treating cryptocurrency as “an investment contract,” and claims SEC regulation threatens to render states powerless to prosecute cryptocurrency scammers.
U.S. consumers reported losing more than $4.6 billion to investment scams in 2023, more than any other category, a 21% year-over-year increase.
The states in the brief make the case that the SEC is violating the Administrative Procedure Act and Major Questions Doctrine. Drummond called the SEC “unelected bureaucrats” that don’t have the authority to bypass Congress.
“This brazen federal overreach by the Biden Administration will significantly hinder Oklahoma from protecting our citizens from scams,” Drummond said in a statement Thursday. “Moreover, the SEC’s policing of cryptocurrency is certain to 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 to play Big Brother in this regard.”
Oklahoma Bitcoin Association President Storm Rund 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 commends Drummond’s effort to protect Oklahomans and challenge what they believe is a “pattern of federal overreach from the Biden Administration in disregarding administrative procedure laws and acting without the guidance of Congress.”
Rund said Oklahoma has placed itself on the national stage by passing legislation like House Bill 3594, which protects an individual’s ability to self custody their assets and provides industry definitions for future regulation on 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 that trend to continue,” Rund said in a statement Thursday.
As for how to avoid being a victim of a digital currency scam, Rund advised avoiding responses to direct messages on social media, texts, phone calls or emails from people you don’t know regarding bitcoin, cryptocurrencies, stablecoins or any other investment vehicle.
“Never share your seed phrase. Never send money to people you don’t know over the internet. Don’t trust, verify,” Rund said.
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