Securities Regulation Daily Wrap Up, BLOCKCHAIN—21 state attorneys general warn SEC against federal overreach on crypto transactions, (Oct 22, 2025)

By Suzanne Cosgrove

The coalition cautioned the Commission against creating regulations that would allow scammers to bypass state consumer protection laws.

Led by Iowa Attorney General Brenna Bird, a group of 21 state attorneys general this week sent the SEC a letter asking the Commission to consider the effect of new cryptocurrency and digital asset regulations on states’ laws.

“The SEC is working hard to come up with a common-sense framework for how to responsibly regulate cryptocurrencies and we are helping them understand how regulation could have unintended consequences that hurt consumers,” Bird said in a release.

The coalition’s letter is a response to SEC Commissioner Hester Peirce’s February request for information, which she titled “There Must Be Some Way Out of Here,” on a proposed taxonomy that puts crypto assets into several categories of securities and non-securities.

To guide public input, Peirce included a list of 48 questions in her request, but the attorneys general focused largely on the first question, which addresses the security status of crypto assets and related transactions.

What constitutes a security? “We urge the Securities and Exchange Commission to give clear, narrowly tailored definitions regarding when a digital asset or related transaction constitutes a security under federal securities laws,” the attorneys general wrote. “Such clarity is essential to prevent federal overreach that could preempt vital state authorities, ensure effective consumer protection, and support States’ operational needs in areas like unclaimed property administration.”

To that end, the states are looking for clarity around definitions related to what constitutes a security, they said.

“Clear and precise federal definitions are critical to maintaining the balance of power between federal and state governments, protecting consumers from harm, and allowing States to innovate in regulating emerging technologies,” they added. “Without those definitions, ambiguity in federal securities law risks undermining state sovereignty and consumer safeguards.”

Preventing federal overreach. Clear definitions also will prevent the federal government from improperly preempting state authority, the state officers said.

“Under principles of federalism, States have broad authority to enact legislation for the public good, while the national government possesses only limited powers that are specified in the Constitution,” the letter states. “That foundational structure ensures that States retain primary responsibility for policing local matters, including consumer protection and economic regulation.

“Federal overreach could preempt States’ regulatory frameworks that are specifically tailored to digital assets,” they said.

As of 2025, some 40 states have introduced or enacted legislation on digital assets, including: Kentucky’s House Bill 701, which establishes a framework for blockchain and crypto activities; Wyoming’s special-purpose depository institutions (SPDIs), which focus on digital assets; New York’s BitLicense regime, established by the New York State Department of Financial Services; and Montana’s Financial Freedom and Innovation Act, also known as Senate Bill 265, which creates a framework for companies issuing network tokens.

“These state initiatives provide regulatory certainty that fosters innovation, attracts businesses, and generates economic benefits like job creation and increased tax revenues,” the attorneys general said.

Iowa’s attorney general was joined in the letter to the SEC by state officers from Alabama, Alaska, Arkansas, Florida, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah and West Virginia.

MainStory: TopStory Blockchain ExchangesMarketRegulation FederalPreemption GCNNews SECNewsSpeeches AlabamaNews AlaskaNews ArkansasNews FloridaNews IdahoNews IndianaNews IowaNews KansasNews LouisianaNews MississippiNews MissouriNews MontanaNews NebraskaNews OklahomaNews SouthCarolinaNews SouthDakotaNews TennesseeNews TexasNews UtahNews WestVirginiaNews KentuckyNews