SEC Crypto Lawsuit Paused Amid Leadership Shift; IRS DeFi Rule Overturned

A federal judge has paused a high-profile lawsuit between 18 Republican state attorneys general, the DeFi Education Fund, and the U.S. Securities and Exchange Commission (SEC), citing the agency's leadership change. The lawsuit, filed after Donald Trump's 2024 election victory, claimed the SEC had overstepped its authority by targeting crypto exchanges, infringing on states’ regulatory rights over digital assets.

The SEC's filing on Wednesday referenced the confirmation of Paul Atkins as the new chair, suggesting that the leadership transition could lead to a resolution. In response, the court suspended all deadlines for 60 days and ordered the parties to submit a joint status report within 30 days.

The original complaint emphasized that states have developed their own frameworks for overseeing digital asset platforms, such as money-transmitter licensing and liquidity assurance requirements. The lawsuit also argued that Congress had consistently declined to grant the SEC broad authority over the crypto industry, reinforcing the states’ regulatory autonomy.

Meanwhile, Congress is preparing to consider crypto market structure legislation that may further define federal oversight roles. In a related development, the SEC has recently dropped or paused enforcement actions against over a dozen crypto companies, signaling a broader shift in approach under the new administration.

Additionally, a separate lawsuit against the Internal Revenue Service (IRS) over its DeFi broker rule was dismissed on the same day. Filed by the DeFi Education Fund, Texas Blockchain Council, and Blockchain Association, the case was rendered moot after President Trump signed a Congressional Review Act resolution nullifying the IRS rule—the first crypto-related legislation enacted during his presidency.

These developments mark a significant pivot in U.S. crypto regulation, potentially easing federal pressure on decentralized finance and blockchain innovators.