tl;dr
The Blockchain Association, a crypto industry lobbying group, has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) over the expansion of the legal definition of "dealer" to include decentralized finance (DeFi) users and projects. The lawsuit, filed in Texas, argues that the ...
The Blockchain Association has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) over the expansion of the legal definition of "dealer" to include decentralized finance (DeFi) users and projects. The lawsuit, filed in Texas, argues that the SEC's rule change is an overreach and poses significant risk to digital asset market participants in the U.S. The association is seeking a declaratory judgment that the SEC violated the Administrative Procedures Act (APA) by expanding its definition of dealer without considering feedback from crypto groups.
This legal action reflects a proactive approach by crypto companies in dealing with regulatory challenges. In its latest offensive legal move against government regulators, the Blockchain Association, a prominent crypto industry lobbying group, sued the U.S. Securities and Exchange Commission (SEC) for expanding an existing legal definition of the word “dealer” to apply to decentralized finance (DeFi) users and projects. The rule change, first announced in February, expanded the SEC’s definition of dealer to encompass DeFi protocols and transactions, thus requiring such projects to register as securities exchanges and brokers or face legal repercussions.
The SEC, however, has offered no guidance as to how DeFi projects—which are automated and execute transactions without human oversight—could possibly comply with rules designed for traditional stock exchanges. The rule would appear to view some DeFi traders as legally equivalent to professional stock brokers. Crypto groups decried the rulemaking as “a troubling overreach.” SEC Commissioner Hester Peirce, a noted crypto industry ally, condemned it as harmful to both market participants and the broader market.
The lawsuit reflects a change in strategy when it comes to how crypto companies deal with hostile government entities. Laura Sanders, Policy Counsel at the Blockchain Association, stated that “The industry is certainly going on the offensive,” and added, “While we take every opportunity to engage with regulators, that engagement has not been reciprocated by the SEC.” The SEC is accused of overreaching in its regulation of the crypto industry and failing to consider complaints and comments from crypto groups in its process of creating the new rule.
Today’s suit is only the latest in a recent trend of legal actions preemptively targeting the SEC, as opposed to waiting for ever more incoming lawsuits from the federal agency. The lawsuit filed in Texas, which is considered one of the more crypto-friendly states in the country, reflects a proactive stance by the crypto industry in addressing regulatory issues.
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