Judge Pauses 18-State Lawsuit Against SEC Amid Leadership Shakeup

A U.S. federal judge has granted a 60-day pause on a lawsuit brought by 18 Republican state attorneys general and the DeFi Education Fund against the Securities and Exchange Commission (SEC), as shifting leadership at the agency could potentially render the case irrelevant.

Kentucky District Court Judge Gregory Van Tatenhove approved the stay on April 16, citing a filing from the SEC that indicated the dispute might be resolved under the new administration.

The judge instructed all parties to submit a joint status update within 30 days.

SEC Accused of Overreach in Lawsuit Over Crypto Enforcement

The lawsuit, filed in November 2024, accused the SEC of overstepping its regulatory authority, particularly in its aggressive enforcement actions against crypto exchanges.

The plaintiffs, led by attorneys general from states such as Texas, Florida, Wyoming, and Ohio, argued that the agency’s actions amounted to “gross government overreach” and violated the principles of federalism.

“Without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States,” the suit claimed.

The legal momentum shifted after Paul Atkins, a former Wall Street advisor and board member for several crypto advocacy organizations, was sworn in as the new SEC chair earlier this month.

He replaces acting chair Mark Uyeda and takes over from former chairman Gary Gensler, whose tenure was marked by heightened scrutiny of digital asset platforms.

"The SEC's sweeping assertion of regulatory jurisdiction is untenable. The digital assets implicated here are just that – assets, not investment contracts covered by federal securities laws." – 18 States and DEF in last week's lawsuit against the SEC.

Check out the latest DEF… pic.twitter.com/c1y1gvQOBa

— DeFi Education Fund (@fund_defi) November 19, 2024

The pause in proceedings comes amid a broader trend of de-escalation in crypto-related enforcement.

On the same day, April 16, the DeFi Education Fund, along with the Blockchain Association and the Texas Blockchain Council, voluntarily dismissed their lawsuit against the Internal Revenue Service.

That case challenged the now-repealed IRS “DeFi broker rule,” which would have required decentralized finance protocols to report user transactions.

The dismissal followed President Donald Trump’s signing of a bill on April 11 to nullify the controversial regulation.

Trump-Era Shift Signals SEC Reassessment of Crypto Regulation

The SEC’s recent shift in tone under President Donald Trump reflects a broader effort to reevaluate the agency’s approach to digital assets.

Uyeda announced on April 5 that, in line with Trump’s deregulation agenda and guidance from the Department of Government Efficiency (DOGE) led by Elon Musk, the SEC is reviewing seven staff-issued statements—five of which concern cryptocurrencies.

Statement from Acting Chairman Mark Uyeda: Pursuant to Executive Order 14192, Unleashing Prosperity Through Deregulation, together with recommendations from DOGE, I have requested Securities and Exchange Commission staff promptly to review the following staff statements.

— U.S. Securities and Exchange Commission (@SECGov) April 5, 2025

Among those under review is a 2019 framework from the SEC’s FinHub that assessed when digital asset sales could qualify as investment contracts under the Howey test.

Other documents being reconsidered include statements from the Divisions of Investment Management, Corporation Finance, and Examinations, particularly those addressing risks tied to Bitcoin futures, crypto custody, and industry-wide bankruptcies during 2022.

Under Atkins’ leadership, the SEC has already withdrawn or delayed several prominent cases against crypto firms.

The agency dropped its lawsuits against Coinbase and Cumberland DRW earlier this year, and a separate investigation into Uniswap Labs closed in February without enforcement action.

In the most recent case, the SEC closed its investigation into CyberKongz, a prominent Ethereum-based NFT and gaming project, with no enforcement action taken, the team announced on Tuesday.