Court Pauses 18-State Lawsuit Against SEC Over Crypto Trading Rules Ahead of Possible Settlement

Just days after acting SEC chairman Mark Uyeda suggested temporary regulatory relief may be coming  for crypto exchanges, a federal district judge in Kentucky agreed to place a 60-day pause on a lawsuit brought by 18 states against the agency over the its moves to regulate the crypto trading platforms, according to a report in Coindesk.

The 18 state attorneys general, all Republican, along with the DeFi Education Fund, filed the lawsuit in November alleging the federal securities regulator under then chairman Gary Gensler had exceeded its authority in filing lawsuits against crypto exchanges within their borders. In a joint filing with the court on Wednesday, however, the parties suggested Senate confirmation of the new chairman of the SEC, Paul Atkins, could lead to ending the litigation. In granting the motion for a pause, judge Gregory Van Tatenhove ordered the sides to submit a joint status report on negotiations to resolve the case within 30 days.

“Some States, for instance, have enacted regulatory regimes for financial institutions focused on digital assets; others have required digital asset platforms to obtain money-transmitter licenses and security bonds to guarantee liquidity,” the original complaint said. “While state regulatory approaches have varied in accordance with local needs, they have consistently endeavored to provide transparent and administrable rules of the road. And Congress has repeatedly declined proposals to give federal agencies broad regulatory power over digital assets.”

Related: SEC Chairman Floats Temporary Regulatory Relief For Crypto Exchanges

The SEC under acting chair Uyeda, and now Atkins, has been far friendlier toward crypto and other digital-asset trading then it was under the crypto-skeptical Gensler. Uyeda, a long-time crypto advocate, had overseen the dismissal or suspension of dozens of agency investigations or cases that were launched under the previous leadership. In February, Washington, DC, district judge Amy Berman Jackson granted a 60-day pause in a case against Binance and ordered the parties to submit a joint status report on negotiations by April 14^th, per Decrypt.

Atkins, a former SEC commissioner, had since served as co-chair of the Token Alliance, a crypto advocacy organization within the Chamber of Digital Commerce.

A separate lawsuit, filed by the DeFi Education Fund and the Blockchain Alliance against the IRS was also dropped on Wednesday. The suit alleged an IRS rule enacted during the Biden Administration requiring defi platforms be treated as brokers exceeded the agency’s authority. But last week, President Trump signed a joint House-Senate resolution to nullify the rule. In a filing Wednesday, the parties said the nullification rendered the lawsuit “moot.”