Appeals Judges Question Scope of Order Blocking Arkansas Law on Foreign-Owned Crypto Mines

Arkansas asked a federal appeals court Tuesday to lift a 2025 order that has kept the state from enforcing its ban on foreign ownership of cryptocurrency mines, and at least one judge on the three-judge panel signaled the order may reach too far.

The Eighth U.S. Circuit Court of Appeals heard 15 minutes from each side Tuesday afternoon in St. Paul, Minn., in the state’s appeal of a preliminary injunction issued by Chief U.S. District Judge Kristine Baker of Little Rock. The panel, Judges James Loken, Bobby Shepherd and David Stras, did not rule from the bench. The law stays blocked until the court issues a decision, and there is no deadline for one.

“Regulating property ownership and protecting public well-being go to the very heart of state police powers,” Joseph Nelson, the lawyer arguing for Attorney General Tim Griffin and Oil and Gas Commission Director Alan York, told the court, according to the court’s audio recording of the argument. He said the law keeps crypto mining facilities from straining local utilities and limits ownership by entities tied to “countries like North Korea and China, which the federal government has already deemed unfit to receive arms exports.”

What the law does

The Legislature passed Act 174 during the 2024 fiscal session. It requires any “digital asset mining business,” defined as a group of computers at one site using more than one megawatt of electricity on average, to get a permit from the Oil and Gas Commission. The commission wrote its permitting rules, known as Rule K, under the act.

The act also bars a “prohibited foreign party” from holding any interest in a crypto mine, which the law defines as anything greater than zero percent. The list of prohibited parties is tied to a federal arms-export rule covering countries such as China, Iran, North Korea and Venezuela. The attorney general can order a foreign owner to divest within 365 days. If that doesn’t happen, a circuit judge can order the mine sold through judicial foreclosure, and the owner can face a civil penalty of up to $1 million or 25 percent of the value of its stake.

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At an April 2024 Senate committee hearing on the crypto-mining bills, Sen. Josh Bryant of Rogers said foreign-owned operators would be asked to leave the state. “If they’re foreign-owned, they’ll have to divest to become American-owned at least and hopefully Arkansan-owned,” Bryant said, according to Baker’s ruling in a related case.

Why it is blocked

The Arkansas Cryptomining Association, a trade group of mining companies, sued York, Griffin and the state in March 2025. Baker held an evidentiary hearing that April, with part of the testimony under seal, and on April 29, 2025, granted the injunction.

She found the association was likely to win its claim that the foreign-ownership ban is preempted by federal law, which already gives the president, through the Committee on Foreign Investment in the United States, the power to review and block foreign investments on national security grounds. She also found the ownership ban could not be separated from the rest of the act. So she barred York and Griffin from enforcing any part of Act 174 or Rule K, including the permitting rules, until further order.

The state appealed in May 2025. The case was first set for argument in St. Louis in April, but the court took it off the calendar after the state asked for a continuance.

Tuesday’s argument

Nelson told the judges federal foreign-investment review and the arms-export list exist to limit investment when national security is at stake, not to protect any particular deal, so a state law that limits investment further does not conflict with them. He also said the federal government has never objected to Act 174.

“That silence from the federal government speaks volumes,” Nelson said.

Stras pressed that point. If federal law limits foreign investment to what Washington considers “some sort of ideal amount,” he said, 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.”

One judge asked Nelson why the Legislature put the permitting program under the Oil and Gas Commission rather than the Public Service Commission, and whether the Oil and Gas Commission regulates electricity at all. Nelson said he did not know and offered to file a supplemental brief.

Alexander Jones, arguing for the association, said the federal government controls foreign affairs and national security and that Congress, in the 2018 law that expanded the federal review process, declared it U.S. policy to “enthusiastically welcome and support foreign investment consistent with the protection of national security.” He said Arkansas’ zero-percent threshold reaches investments far too small to ever trigger a federal review.

Stras answered that the specific provisions of the federal law focus almost entirely on security. “You might be right about the purpose, but it doesn’t really show up anywhere else in the statute,” he said.

Most of the pushback came on the breadth of Baker’s order. Because the association brought a facial challenge, asking the court to strike the law in every application, one judge told Jones that “if there’s one application that would be constitutional or consistent with federal law, you lose.”

Loken offered one example: if state officials read Act 174 to exempt a transaction the federal government had already reviewed and approved, the law would not conflict with federal review at all. “The district court’s decision to me is way overbroad,” he said. Courthouse News Service, which also covered the argument, attributed the remark to Loken.

Jones said the association had asked only to stop the foreign-ownership provisions, and that Baker blocked the whole act because she found the parts could not be separated under state law. Loken summed that up: “You say we’ve asked for a slice of bread, but the court kindly gave us the full loaf.”

From the bench, a judge said the district court “just blew by” the normal practice of letting state officials interpret their own law first, “based on its China focus.” When Jones answered that the record showed state officials focused on China and trying to assert federal powers, the judge replied, “So what?” and added, “Wait until they exercise it and sue. That’s the normal deference to state authority.”

“If the injunction is overbroad, it shouldn’t stay in effect,” Loken said. “It’s an affront on separation of powers to keep it in effect.”

Jones noted the association’s complaint also asked, in the alternative, for relief limited to its members. “Fine. Then let’s go back to that,” the judge said.

In rebuttal, Nelson said a general statement of policy in a law’s preamble cannot override what its operative sections say. Asked whether anything would stop state officials from reading Act 174 to exempt federally approved deals, Nelson said that was possible, though he was not in a position to make that representation to the court, and that he knew of nothing that would rule it out. He said facial challenges “short-circuit the democratic process” and asked the court to “reverse and vacate the district court’s preliminary injunction.”

The other case

The same appeals court is weighing a second, narrower challenge. Jones Eagle LLC, which operates a crypto mine in Arkansas County and is a member of the association, won an injunction from Baker in December 2024 that blocks the state from enforcing Act 174 and Act 636 of 2023, the state’s foreign-ownership limit on agricultural land, against that company only. A different Eighth Circuit panel, Shepherd, Stras and Judge Jane Kelly, heard that appeal in January. Court records do not show a decision yet.

During Tuesday’s argument, one judge asked Jones why the court should not keep holding the association’s case until the Jones Eagle opinion comes out. Jones said the two cases overlap considerably but argued the association’s challenge stands on stronger ground because Act 174 regulates businesses, not land.

The association’s lawsuit in Little Rock remains open. Baker set aside the association’s other claims, including that the law violates equal protection by targeting investors based on national origin, and has not ruled on them.