Today the Blockchain Association and the Crypto Freedom Alliance of Texas fired a legal salvo against the SEC, marking a high-stakes battle over the agency’s Dealer Rule, which has stirred up significant dissent within the crypto community. At the center of the controversy is the SEC’s decision to expand the definition of what it means to be a “dealer” of cryptoassets—a move that many feel could hamstring the American crypto sector.
Rule Redefinition Sparks Legal Challenge
In the Northern District of Texas, the Blockchain Association (BA) and the Crypto Freedom Alliance of Texas (CFAT) laid down the gauntlet, challenging the SEC on what they consider to be overreach and reckless rule-making.
The complaint asserts that the SEC’s revision of the dealer definition under the Securities Exchange Act of 1934 goes beyond the agency’s jurisdiction and ignores the established norms of regulatory engagement. This expansion, they argue, has not been matched with a coherent explanation from the SEC on how the new rule would impact the blockchain technology at play.
This isn’t just a matter of semantics or regulatory nitpicking. BA and CFAT contend that the broader, ambiguous definition now ensnares many who do not typically fall under the dealer category, thereby casting a wide net that could disrupt the livelihood of millions of Americans and the operational stability of countless businesses involved in crypto.
Their filing highlights a critical shortfall in the SEC’s approach: a glaring lack of substantive responses to community feedback and a failure to weigh the economic implications of such regulatory enlargement.
BA and CFAT are pushing for a court order to rescind the Dealer Rule, claiming that the rule was established through a process fraught with Administrative Procedure Act (APA) violations. They emphasize that the rule’s foundation lacks transparency and did not undergo the rigorous, fair rulemaking procedure that stakeholders expect from a regulator like the SEC.
Community and Consequences
Kristin Smith, CEO of the Blockchain Association, voiced her frustration, noting that this is the latest example of the SEC’s blatant attempts to unlawly regulate outside its authority, skirting legal obligations to address the numerous concerns received during its compressed comment period.
She accused the SEC of advancing an anti-crypto crusade that could potentially force U.S. companies to flee overseas, thus stifling domestic innovation and instilling fear among American innovators.
The legal push by BA and CFAT is framed as a defensive measure against what they see as a regulator gone rogue. One that is not only misinterpreting its legislative mandate but also actively undermining an industry at the frontier of technological innovation.
Their action seeks declaratory and injunctive relief to not only overturn the Dealer Rule but also to shield the crypto sector from what they describe as the SEC’s overzealous regulatory grasp.
