Arkansas Cryptomining Association Sues State Over Discriminatory Crypto Rules

The Arkansas Cryptomining Association has filed a lawsuit against two state officials, Arkansas Attorney General Tim Griffin and the director of the Arkansas Oil and Gas Commission, Lawrence Bengal. The association argues that the state's rules, specifically "Rule K" and "Act 174," are unconstitutional and discriminatory as they prohibit foreign-party controlled businesses, including those engaged in cryptocurrency mining.

The lawsuit was filed on March 13 in the US District Court Eastern District of Arkansas. It follows a federal court ruling from last November that temporarily barred Arkansas from preventing a naturalized US citizen of Chinese descent from operating a crypto mining business. The association's director, Connor L. Kempton, stated that the vagueness of these rules gives the defendants arbitrary and discriminatory enforcement powers, enabling them to grant or deny permits at their own discretion.

Kempton argued that the application of Rule K and Act 174 is unconstitutional and can be discriminatory based on race, alienage, and national origin. He specifically pointed to the Equal Protection Clause of the 14th Amendment of the US Constitution, which prohibits states from denying any person equal protection of the laws based on their race, alienage, or national origin. Kempton also argued that these rules strip American citizens like Qimin “Jimmy” Chen, who runs the crypto mining firm Jones Eagle LLC, of due process rights under the 14th Amendment.

Additionally, Kempton 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. He stated, “Act 174 seeks to establish Arkansas' own foreign policy, thereby intruding upon the federal government's exclusive power to govern foreign affairs.”

District Court Judge Kristine G. Baker ruled on December 9 that Arkansas state officials were barred from enforcing Act 174 against Jones Eagle until further notice. This legal action highlights the broader debate surrounding the regulation of cryptocurrency mining activities, particularly the balance between environmental concerns and the need for fair and non-discriminatory regulations.

The lawsuit also raises questions about the potential economic implications of the regulation. Cryptocurrency mining is a significant industry, and foreign miners contribute to the state's economy through job creation and investment. By targeting foreign miners, the regulation could deter future investments and hinder the growth of the cryptocurrency sector in Arkansas. The association's legal action seeks to ensure that the state's regulatory framework is fair, transparent, and conducive to the growth of the cryptocurrency industry.

The outcome of this legal battle will have far-reaching implications for the cryptocurrency mining industry in Arkansas and beyond. If the association succeeds in overturning the regulation, it could set a precedent for other states considering similar measures. Conversely, if the state's rule is upheld, it could embolden other jurisdictions to implement stricter regulations targeting foreign cryptocurrency miners. The case underscores the need for a balanced approach to regulating the cryptocurrency industry, one that addresses environmental concerns while promoting economic growth and fairness.