Regulation
Drummond Joins Amicus Brief Challenging SEC Regulation of Cryptocurrencies
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OKLAHOMA CITY — Oklahoma Attorney General Drummond opposes federal regulation of cryptocurrencies.
Drummond announced Thursday that 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 object to the SEC’s regulation of cryptocurrency assets absent an investment contract because Congress has not delegated that authority to the agency.
“States have a vested interest in preventing the SEC from overriding consumer protection and other state laws in attempting to regulate cryptocurrencies as securities,” the brief reads.
Since the emergence of cryptocurrency, there has been debate over whether decentralized digital currency should be considered a security, a currency, or a commodity.
SEC Chairman Gary Gensler categorizes cryptocurrency as a security, citing the Howey test, established by the 1946 decision SEC v. W.J. Howey Co. The test has four qualifiers: a monetary investment, an expectation of profit, an investment in a common enterprise, and dependence on the efforts of a promoter or third party.
The brief argues that the SEC is ignoring the tenets of the Howey test, treating cryptocurrency as “an investment contract,” and claims that the SEC’s rulemaking 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% increase year over year.
The states cited in the brief argue that the SEC violates the Administrative Procedure Act and the major questions doctrine. Drummond called the SEC “unelected bureaucrats” who lack the power to circumvent Congress.
“This blatant federal interference by the Biden administration will significantly hinder Oklahoma’s ability to protect its citizens from scams,” Drummond said in a statement Thursday. “Furthermore, the SEC’s oversight of cryptocurrencies will certainly stifle innovation and devastate the growing industry. We will defend and protect our citizens from evil 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 common, especially on social media.
The association applauds Drummond’s efforts to protect Oklahomans and challenge what it sees as a “pattern of federal interference by the Biden administration, which ignores administrative procedure laws and acts without the guidance of Congress.”
Rund said Oklahoma has put itself on the national stage by passing laws like House Bill 3594, which protects an individual’s ability to self-manage 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 advised avoiding responding to direct messages on social media, text messages, phone calls or emails from people you don’t know about bitcoin, cryptocurrencies, stablecoins or any other investment vehicle.
“Never share your seed phrase. Never send money to people you don’t know on the internet. Don’t trust, verify,” Rund said.