Republican-led states have decided to temporarily halt their legal action against the U.S. Securities and Exchange Commission concerning its jurisdiction over cryptocurrency firms, citing new leadership within the SEC. The lawsuit, initiated in November, claimed that the SEC was overstepping into the domain of state regulators.

The judge overseeing the case has instructed both parties to submit a joint status report within 30 days while suspending all deadlines for 60 days. The lawsuit highlighted that states had implemented different regulatory frameworks for digital asset financial institutions, emphasizing transparency and consistency in rules.

Meanwhile, discussions are underway in Congress regarding legislation on market structure that could define federal regulators' roles in supervising cryptocurrencies this year. At the same time, a separate legal dispute brought by crypto advocates against the Internal Revenue Service's DeFi broker rule was also withdrawn recently due to concerns about the IRS's regulatory powers.

23

Republican States Pause Lawsuit Against SEC Over Crypto Authority

Crypto lobbyists also dropped a lawsuit against the IRS.

• Republican state attorneys general asked a judge to pause their ongoing lawsuit against the U.S. Securities and Exchange Commission over its authority to police crypto firms, citing its new leadership.
• The lawsuit, filed in November, alleged that the SEC was intruding into state regulators' remit.

The judge ordered the parties to file a joint status report within 30 days but paused all deadlines for 60 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 lawsuit 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."

Congress is expected to pick up market structure legislation that may address federal regulators' roles in overseeing crypto this year, and key committees have already begun holding hearings.

IRS broker rule

A separate lawsuit filed by the DeFi Education Fund, the Texas Blockchain Council and the Blockchain Association against the Internal Revenue Service was also dropped on Wednesday. This lawsuit argued that the IRS' DeFi broker rule went beyond the agency's authority.