Arkansas Cryptomining Association Sues State Over Discriminatory Crypto Mining Rules

The Arkansas Cryptomining Association has filed a lawsuit against two Arkansas state officials, alleging that they have enforced an unconstitutional and discriminatory state rule. This rule prohibits foreign-born American citizens from engaging in cryptocurrency mining activities. The complaint, filed on March 13 in the US District Court Eastern District of Arkansas, names Arkansas Attorney General Tim Griffin and the director of the Arkansas Oil and Gas Commission, Lawrence Bengal, as defendants.

The lawsuit follows a federal court ruling from last November, which temporarily barred Arkansas from preventing a naturalized US citizen of Chinese descent from operating a cryptocurrency mining business. The state rules in question are “Rule K” and “Act 174,” which prohibit foreign-party controlled businesses in the state. The Arkansas Cryptomining Association argues that the vagueness of these rules gives the defendants arbitrary and discriminatory enforcement powers, allowing them to grant or deny permits at their own discretion.

Director Connor L. Kempton of the Arkansas Cryptomining Association stated that the application of Rule K and Act 174 is unconstitutional and can be discriminatory based on race, alienage, and national origin, among other factors. He specifically pointed to the Equal Protection Clause of the 14th Amendment of the US Constitution in arguing the illegality of these rules. The Equal Protection Clause prohibits US states from denying any person equal protection of the laws based on their race, alienage, or national origin.

Kempton also argued that Rule K and Act 174 strip American citizens like Qimin “Jimmy” Chen, who runs the crypto mining firm Jones Eagle LLC, of their due process rights under the 14th Amendment. Additionally, he contended that the prohibitions and penalties imposed under Act 174 infringe on the federal government’s authority to investigate, review, and take action on foreign investments. Kempton asserted that Act 174 seeks to establish Arkansas's own foreign policy, thereby intruding upon the federal government's exclusive power to govern foreign affairs.

On December 9, District Court Judge Kristine G. Baker ruled that Arkansas state officials were barred from enforcing Act 174 against Jones Eagle until further notice. This legal action highlights the ongoing debate over the regulation of cryptocurrency mining and the potential impact on both domestic and foreign entities operating within the state. The outcome of this lawsuit could set a precedent for how other states approach the regulation of cryptocurrency mining, particularly in relation to foreign entities. The association's legal challenge underscores the need for fair and non-discriminatory regulations that foster innovation and economic growth in the cryptocurrency sector.