A federal judge has struck down a regulation introduced by the U.S. Securities and Exchange Commission (SEC) that aimed to redefine the term “dealer.” This ruling comes after the SEC had broadened this definition to include liquidity providers and automated market makers managing over $50 million in capital.
Ruling Highlights
In his decision, U.S. District Judge Reed O’Connor argued that the SEC exceeded its legal authority with this expansive interpretation. He emphasized that the definition was misaligned with both the text of the law and its historical context under the Exchange Act. Marisa Tashman Coppel, a legal spokesperson for the Blockchain Association—a group advocating for the cryptocurrency industry—hailed the ruling as a major win for the emerging crypto space. However, the SEC still has the option to appeal the decision in the 5th Circuit Court of Appeals, which could bring the broker-dealer regulation back into play.Background of the Controversy
The controversy arose following the SEC’s adoption of a revised rule on February 6, 2024, which aimed to redefine “dealer” and “government securities dealer” within the framework of existing securities law. If implemented, this rule would have imposed onerous and often impractical regulatory obligations on a variety of cryptocurrency businesses. This burden would hit decentralized networks particularly hard, as they typically lack a central authority capable of enforcing Know Your Customer (KYC) or Anti-Money Laundering (AML) practices. Resistance to the proposed changes was widespread, garnering significant pushback from industry leaders, investors, lawmakers, and even some SEC commissioners. Commissioner Hester Peirce, affectionately known as “Crypto Mom,” took a strong stand against the SEC’s move, suggesting it overstepped the agency’s regulatory scope by attempting to regulate decentralized protocols.Future Implications
In April, advocacy groups in the cryptocurrency space escalated their opposition by filing a lawsuit against the SEC, alleging that the agency’s actions represented an overreach that stifled innovation in the United States. “`htmlSource: Cointelegraph.com
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