Arkansas Defends Crypto Mining Law as Judge Questions Injunction

Arkansas is asking a federal appeals court to reinstate its law restricting certain foreign ownership of cryptocurrency mining businesses. The state argues that a lower court went too far by blocking the entire law over concerns about the restrictions. During a recent hearing, an appeals court judge questioned whether the statewide injunction should remain in place.

Judge Challenges Scope of Crypto Mining Injunction

The Arkansas Cryptomining Association sued the state in 2025 over foreign ownership limits in Act 174. A lower court blocked the entire law, finding those limits likely preempted by federal law and in conflict with foreign policy.

That remedy drew criticism from U.S. Circuit Judge James Loken, who called it “way overbroad.” He said the order raised separation-of-powers concerns and should not remain in effect simply because some claims might justify relief.

Foreign Ownership Rules Divide the Parties

Act 174 bars legally defined prohibited foreign parties from holding any ownership interest in covered digital asset mining businesses. The restrictions are tied to federal arms-export rules covering countries including China, Iran, North Korea, and Venezuela.

Joseph Nelson, Arkansas’ attorney, said states have long regulated property ownership and protected public well-being. He also linked the law to concerns about crypto mining facilities straining local utilities. He argued that federal investment rules restrict security threats while leaving room for states to adopt safeguards.

The association argued that Arkansas was making foreign policy decisions reserved for Washington and discriminating against investors based on national origin.

It argued that the rules cover even minor investments that would not require federal review. According to the association, those restrictions could also leave federal officials with fewer bargaining chips when conducting foreign policy.

Federal Investment Policy Faces Scrutiny

U.S. Circuit Judge David Stras questioned whether stricter state limits could frustrate federal investment objectives. Nelson responded that federal officials had neither protested nor suggested the law weakened their foreign policy authority.

Stras also questioned the association’s position, suggesting federal security priorities could leave states room to regulate property. Association attorney Alexander Jones argued that encouraging investment and protecting national security were complementary goals.

However, Stras noted that federal investment committees were not explicitly directed to weigh economic benefits against security concerns. A separate case involving Jones Eagle LLC, a member of the Arkansas Cryptomining Association, concerns a narrower injunction covering the company alone. That case also remains under Eighth Circuit review, but it is distinct from the association’s challenge to the statewide enforcement ban.

Related: SEC Clarifies Proof-of-Work Crypto Mining Isn’t a Security, Offering Industry Relief