What to know:

• Republican state attorneys general have requested a judicial pause in their current lawsuit against the U.S. Securities and Exchange Commission (SEC) regarding its regulatory authority over crypto businesses. This move comes in light of recent changes in SEC leadership.
• The ongoing lawsuit, initiated in November, claims that the SEC is overstepping its boundaries by interfering with state regulators’ authority.

A federal judge halted the lawsuit involving 18 Republican state attorneys general and a lobby group focused on decentralized finance against the SEC. This decision was made following a note on the SEC’s new leadership.

The Republican AGs, in collaboration with the DeFi Education Fund, filed the lawsuit after Donald Trump secured the presidency in the 2024 elections, accusing the SEC of exceeding its jurisdiction with actions against crypto exchanges. The SEC hinted that the recent confirmation of Paul Atkins as the head of the agency could resolve the litigation.

“Due to a leadership transition in the SEC, this case could potentially be resolved,” the attorney’s filing stated.

The judge has instructed the parties to present a joint status update within 30 days while pausing all associated deadlines for 60 days.

Initially, the lawsuit pointed out that SEC’s enforcement actions were obstructing the states’ abilities to regulate digital asset firms operating within their territories.

Some states have implemented regulatory frameworks for financial institutions dealing with digital assets; others have mandated digital asset platforms to acquire money-transmitter licenses and security bonds to safeguard liquidity.

Despite varying state-level regulations adapted to local needs, there has been an ongoing effort to create transparent and manageable regulatory frameworks. Additionally, Congress has repeatedly declined proposals that would grant federal entities extensive authority over digital assets.

Legislative discussions regarding market structure might address the roles of federal agencies in overseeing cryptocurrencies in the coming year, with key committees initiating hearings.

Meanwhile, the SEC has already retracted investigations and lawsuits against numerous companies and halted actions against several others.

IRS Broker Rule

In related news, another lawsuit brought by the DeFi Education Fund, Texas Blockchain Council, and Blockchain Association against the Internal Revenue Service was also dropped. This case challenged the IRS’s DeFi broker rule as an overreach of authority.

Notably, Trump approved a resolution nullifying this IRS rule last week, marking his first legislative engagement with cryptocurrency policy.

In their Wednesday filing, the involved parties claimed the lawsuit had become moot following Trump’s resolution.