Crypto Freedom and Blockchain Association Alliance Sue the SEC Over Recent Finalized Dealer Rule

The US securities watchdog, SEC, recently adopted a new rule, significantly expanding the definition of “dealer” under the Securities Exchange Act. 

This change potentially captures a wide range of market participants who have never been considered dealers before. The new rule focuses on the post-effects of trading activity, departing from the traditional customer-facing approach. 

This shift has been met with criticism and concern from various sectors of the financial industry, particularly the digital assets market.

Crypto Freedom Alliance of Texas and Blockchain Association Take Action

In response to the SEC’s new rule, the Crypto Freedom Alliance of Texas (CFAT) and the Blockchain Association have filed a complaint for declaratory and injunctive relief. The complaint names the SEC and its Chairman, Gary Gensler, defendants. 

The plaintiffs argue that the new rule exceeds the Commission’s statutory authority and represents uninformed and impulsive decision-making. They also claim that the rule threatens to have untold impacts on digital assets industry stakeholders.

The digital assets industry has unique features that distinguish it from traditional financial markets. These features include the use of decentralized ledgers and open-source software to facilitate trading. 

The complainants contend that the SEC’s new rule fails to consider these unique characteristics. They argue that applying a regulatory framework designed for traditional markets to the digital assets industry could have severe consequences.

The complaint highlights several concerns specific to the digital assets industry. These concerns include potential reductions in liquidity, increased volatility, and decreased price efficiency in digital asset markets. 

The complainants also argue that the rule could harm competition and stifle innovation. They insisted it would discourage market participants from using decentralized finance (DeFi) protocols, which are critical for the development of next-generation internet technologies, such as Web3.

Vocal Demands in Tweets

In a series of tweets, Marisa Tashman Coppel, head of legal affairs at Blockchain Association, has laid out a bold list of demands. This demand is aimed at pushing back against what she describes as “overreach” by the US Securities and Exchange Commission (SEC).

Coppel, the Chief Legal Officer of TRM Labs, a blockchain intelligence company, outlined the “relief” her organization is seeking. Among the key demands highlighted in her tweets is a request for the SEC to “commit to no further one-sided attempts to expand its jurisdiction over digital assets” without proper rulemaking procedures. 

Also, Blockchain Association’s CEO Kristin Smith stated that the new rule is an example of the SEC’s overt moves to regulate outside its authority. She added that the Dealer Rule promotes the SEC’s anti-crypto crusade. Therefore, it unlawfully redefines the boundaries of the regulator’s statutory authority as granted by Congress.

Smith warns that this threatens to drive US companies offshore and incite fear in American innovators. 

The Blockchain Association and the Crypto Freedom Alliance of Texas are staunch American digital asset ecosystem defenders. They seek declaratory judgment and injunctive relief against the SEC to overturn their rule expansion and prohibit its use against the industry.

The Blockchain Association is the collective voice of the cryptocurrency industry, with members including the sector’s top players, leading companies, and investors. They work together to support future progress, favorable national policy, and regulatory frameworks that promote innovation for the crypto economy.

As the case progresses, the outcome has potential implications for the future of the digital assets regulation industry.

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