The SEC is facing pressure from lawmakers to get back into the crypto industry.

The US Securities and Exchange Commission (SEC) faces a growing number of calls to limit its oversight of the crypto industry – and they come from both inside and outside.

The U.S. House Financial Services Committee voted Thursday to appeal the 121 bill, which was used to stop banks from acting as custodians of digital assets starting in March 2022. When passed, the SEC expected the measure to protect against “significant risks and uncertainties associated with the protection of crypto-assets.”

But now there is increasing criticism from House committee members on how SAB 121 was enacted.

Mike Flood (R-NE) said, “The SEC issued SAB 121 without consulting the prudential regulators who are the experts in banking regulation.” “This is a very important control.”

A Government Accountability Office report in October took stock of how SAB 121 was enacted — without the SEC reporting to Congress — and how it could be used for more substantive regulatory guidance.

“This policy was introduced to prevent investors from misappropriation of client crypto assets by custodians, a practice that was at the core of FTX's dramatic collapse when billions of crypto assets were lost,” he said. Maxine Waters (D-CA) during a House committee meeting Thursday.

SEC in “Executive-Only Mode”

But that's not all. Yesterday, eleven US state attorneys general filed a joint amicus brief in the regulator's lawsuit against Payward Ventures—crypto exchange Kraken's mother company—to challenge the SEC's jurisdiction over crypto companies.

“The SEC's enforcement action exceeds its authority,” the lawyers said in the filing. “The court should reject the classification of crypto assets as securities without an investment contract. The SEC's use of this undelegated authority would put state laws at risk for state consumers by better tailoring state laws to specific risks for non-securities.”

The brief was filed by attorneys from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota and Texas.

On the same day, SEC Commissioner Hester Pearce said during the ETDenver event that the regulator is stuck in “executive-only mode”. A knock-on for developers, she argues, is a constant worry about what and how to build new technology.

I think all of you are putting your brains out,” she said of how not to be accused at the event. “If we had better laws, you could focus on building,” she said.