Lawsuit Filed Against SEC by Texas Crypto Freedom Alliance and Blockchain Association Over Expanded Definition of “Dealer”

The U.S. Securities and Exchange Commission (SEC) is facing a lawsuit from the Texas Crypto Freedom Alliance and the Blockchain Association over its expanded definition of a “dealer” that could potentially impact individuals trading in cryptocurrencies.

The SEC adopted the widened definition in February after a 3-2 vote, prompting the lawsuit which alleges that the agency failed to adequately respond to public comments during the rule’s comment period. The plaintiffs are seeking a declaration that the rule is “arbitrary, capricious, or otherwise contrary to the law.”

According to the lawsuit, the expanded definition of a “dealer” could encompass a wide range of digital asset market participants, including users who participate in digital asset liquidity pools. The lack of clarity regarding the definition of security and its application to digital assets is also addressed in the lawsuit.

The Blockchain Association CEO criticized the SEC’s rule as an attempt to unlawfully regulate outside its authority and advance an “anti-digital asset crusade.” The lawsuit highlights the uncertainty in the industry caused by the SEC’s ad hoc approach to categorizing digital assets as securities.

The SEC initially considered excluding crypto from the rule but ultimately decided against it to prevent giving crypto dealers an unfair advantage over traditional financial counterparts. The lawsuit challenges the SEC’s actions and calls for clarity and consistency in regulating digital assets.

Overall, the lawsuit raises important questions about the SEC’s authority and approach to regulating the rapidly evolving crypto industry, highlighting the need for clear guidelines and fair treatment for all market participants.