Lawsuit Filed Against SEC Over Expanded Definition of “Dealer” in Digital Asset Trading

The Blockchain Association and the Crypto Freedom Alliance of Texas have taken a bold step in challenging the U.S. Securities and Exchange Commission (SEC) by filing a lawsuit in Texas. The lawsuit alleges that the SEC’s expanded definition of “dealer” unfairly includes ordinary digital asset trading, which is hindering innovation in the U.S. digital asset sector.

The SEC introduced new regulations in February that broaden the definitions of “dealer” and “government securities dealer,” forcing more participants in the crypto market to register and comply with federal securities laws. The lawsuit argues that this rule is arbitrary and unjust, potentially sweeping in all digital asset market participants, including those who simply participate in digital asset liquidity pools.

Blockchain Association CEO Kristin Smith criticized the SEC’s rule, stating that it represents the agency’s ongoing efforts to regulate beyond its authority. The lawsuit also points out the SEC’s unclear position on which digital asset transactions are considered securities, leading to industry uncertainty.

The pressure on the SEC is mounting as two SEC lawyers were recently forced to resign following sanctions from a federal judge who accused the agency of a “gross abuse of power” in a case against a Utah-based crypto company. This lawsuit adds to the growing tension between the SEC and the crypto industry, highlighting the need for clear and fair regulations in this rapidly evolving sector.