Two prominent bodies in the crypto sphere, the Blockchain Association and the Crypto Freedom Alliance of Texas, have recently taken legal action against the US Securities and Exchange Commission (SEC). In their court filing on April 23, the groups argued that the SEC exceeded its authority by implementing a rule that redefines the definition of a “dealer” of securities. They claimed that this rule was “arbitrary and capricious” and violated the Administrative Procedure Act (APA).
Blockchain Association CEO Kristin Smith expressed her disapproval of the SEC’s actions, stating that the rule demonstrates the SEC’s blatant attempts to unlawfully regulate beyond its authority. Smith believes that the Dealer Rule is part of the SEC’s anti-digital asset crusade and unfairly expands the boundaries of its statutory authority, potentially driving U.S. companies offshore and instilling fear in American innovators. The groups are seeking to nullify the SEC’s Dealer Rule due to the regulator’s APA violations, which hinder industry participants from operating under clear and transparent rules established through a fair rulemaking process.
Marissa Tashman Coppel, the legal lead at Blockchain Association, highlighted the negative effects of the SEC’s rule on the digital asset ecosystem, particularly within the realm of decentralized finance (DeFi). She argued that the lack of clarity in the rule poses risks to liquidity providers, DeFi software, and developers. Coppel pointed out that the new rule introduces tests that focus on trading activity rather than customer relationships, deviating significantly from previous SEC interpretations of the term “dealer”. Additionally, she criticized the SEC for failing to address key issues raised by industry stakeholders during the comment period, such as determining which crypto asset transactions qualify as securities transactions. This lack of guidance makes it challenging for the industry to ensure compliance with the regulations.
The Blockchain Association boasts a diverse member base that includes prominent crypto companies such as Coinbase, Kraken, Circle, and Ripple. These companies, along with other industry stakeholders, are closely monitoring the legal challenge against the SEC’s Dealer Rule and its potential implications for the broader digital asset ecosystem.
