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An appeals judge said a ruling that froze Arkansas’ entire crypto mining law gave industry groups “the full loaf” when they only asked for “a slice of bread,” signalling the court may narrow the injunction even as the fight over banning China-linked miners continues.
Arkansas urged the Eighth Circuit Court of Appeals on Tuesday to let it enforce Act 174, a 2024 law that bars citizens and entities tied to China, Iran, North Korea and Venezuela from owning crypto mining operations in the state.
Arkansas maintained that regulating property ownership within its borders is a longstanding state responsibility, particularly when industrial operations could affect public welfare, electricity infrastructure and local utilities.
Representing the state, attorney Joseph Nelson argued that the law serves legitimate regulatory purposes and should not be invalidated simply because it addresses foreign ownership.
“Regulating property ownership and protecting public well-being goes to the very heart of state police powers,” Nelson said. “These laws ensure that crypto mining facilities will not strain local utilities.”
The argument reflects broader concerns about the infrastructure demands associated with crypto mining. Digital asset mining facilities can consume substantial amounts of electricity, creating potential challenges for utility providers and communities where large operations are established.
Arkansas argued that Act 174 addresses those concerns through a permitting system, noise restrictions and protections for local utilities. According to the state, blocking the entire statute prevents the government from enforcing provisions that were not necessarily implicated by the association’s challenge to foreign ownership restrictions.
Nelson also disputed the suggestion that federal foreign investment laws automatically prevent states from adopting additional safeguards. He argued that federal restrictions designed to address national security threats do not necessarily establish an exhaustive regulatory framework that excludes state involvement.
The state further maintained that the federal government had not objected to Arkansas’ approach.
“The federal government has been silent,” Nelson said. “It has never protested or suggested it’s somehow lessening the federal government’s ability to conduct foreign policy.”
That argument formed a central part of Arkansas’ defence: the state believes it can regulate ownership within its jurisdiction without assuming the federal government’s broader responsibility for international relations.
However, whether the absence of federal objections establishes that the law is legally permissible remains a question for the courts.
The scope of the lower court’s injunction emerged as a major issue during the hearing, with Loken expressing concern that the ruling had suspended far more of the legislation than necessary.
The Arkansas Cryptomining Association originally challenged the foreign ownership provision, but the lower court’s 2025 decision blocked the entire act. The state argued that this outcome improperly prevented enforcement of regulatory provisions that extend beyond the disputed ownership restrictions.
Loken strongly criticised the breadth of the order, suggesting that the association had received relief far exceeding the specific issue it brought before the court.
“You’re saying, ‘we asked for a slice of bread, and the district court gave us the full loaf,’” Loken said.
The judge subsequently questioned whether the injunction should remain in force if its scope was legally excessive.
“If the injunction is overbroad, it shouldn’t stay in effect,” Loken added. “I don’t care if there are one or two issues that should stay in effect; it’s an affront on separation of powers.”
His remarks signalled concern about the judiciary’s role in blocking legislation beyond the dispute directly presented by the parties. The question is particularly significant because Act 174 covers multiple aspects of digital asset mining regulation, not solely foreign ownership.
Nelson echoed the judge’s concerns, arguing that broad constitutional challenges can short-circuit the democratic process by preventing an entire law from taking effect before every provision has been properly examined.
Arkansas maintained that any judicial relief should be tailored to the actual plaintiffs and the legal issues they have raised, rather than automatically extending to every company or operation covered by the legislation.
The appeals court’s examination of the injunction does not necessarily determine whether the foreign ownership restrictions themselves are constitutional. Instead, it raises a separate question about how much of the law should remain blocked while the litigation proceeds.
Beyond the injunction, the hearing examined whether Arkansas‘ restrictions conflict with federal authority over foreign investment and national security.
The Arkansas Cryptomining Association argued that the state cannot independently establish foreign policy restrictions that interfere with the federal government’s ability to manage international relations.
The association also contended that the law could weaken Washington’s negotiating position by limiting investment opportunities that federal authorities might otherwise consider acceptable.
Another concern involves the threshold for triggering the restrictions. According to the association, Arkansas’ law applies regardless of the amount invested, potentially capturing relatively minor investments that would not ordinarily warrant federal scrutiny.
The group argued that such an expansive approach could interfere with the federal government’s ability to determine which foreign investments present genuine security risks.
US Circuit Judge David Stras challenged aspects of Arkansas’ position, suggesting that federal investment restrictions might reflect a deliberate balance rather than an invitation for states to impose additional limitations.
“If so, then going further than what the federal government would want as a matter of foreign policy arguably at least frustrates the objectives of the federal system,” Stras said.
The question highlights a central legal tension in the dispute: whether federal restrictions establish a ceiling on foreign investment regulation or leave states room to impose their own safeguards.
The association’s attorney, Alexander Jones, argued that economic development and national security can reinforce one another. He pointed to federal policy language encouraging the United States to welcome and support foreign investment.
“It’s a twin goal. It is promoting good economics, which itself can enhance national security,” Jones said.
Stras acknowledged that promoting investment might be a legitimate federal objective but questioned whether the relevant legal framework explicitly requires authorities to weigh economic benefits against security concerns.
“You may be right about the purpose, but it doesn’t really show up anywhere,” the judge said.
The exchange underscored the difficulty of determining how far state governments can go when regulating foreign investments in industries considered strategically important.
The Eighth Circuit’s review also intersects with a separate legal challenge involving Jones Eagle LLC, a member of the Arkansas Cryptomining Association that sued the state in 2024.
That company obtained an injunction preventing enforcement of the law against it while its case proceeded. Both injunctions are now before the appeals court, although the association’s challenge addresses the statute on a broader, statewide basis rather than focusing on a single business.
US Circuit Judges James Loken, David Stras and Bobby Shepherd heard Tuesday’s arguments. Loken was appointed by former President George H.W. Bush, Stras by President Donald Trump, and Shepherd by former President George W. Bush.
The dispute comes as state governments continue to grapple with the regulatory challenges presented by energy-intensive digital asset operations and foreign investment in strategically sensitive industries.
Source: Court House News
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