The US Securities and Exchange Commission abandoned its court appeal over a case it lost to expand the definition of a dealer, which was seen as a threat to decentralized finance platforms. The US Securities and Exchange Commission has dropped its effort to undo a court ruling blocking a controversial broker-dealer rule that would have given the agency jurisdiction over decentralized crypto protocols.
In a brief Feb. 19
filing to the Fifth Circut Appeals Court, the SEC said it moved “to voluntarily dismiss this appeal,” which went unopposed. Last month, just days before former SEC Chair
Gary Gensler was due to step down, the agency appealed
a November ruling from a Texas federal court judge in a lawsuit brought by crypto trade groups the Blockchain Association and the Crypto Freedom Alliance of Texas.
The ruling blocked the SEC’s proposed change to the definition of a dealer, which would have required all crypto liquidity providers and automated market makers with more than $50 million in capital to register with the agency. Crypto advocacy groups argued the change would have placed unenforceable requirements on DeFi protocols — many of which have no centralized authority and would have difficulty enforcing Know Your Customer and Anti-Money Laundering laws.
Texas District Court Judge Reed O’Connor said in his ruling that the “SEC exceeded its statutory authority by enacting such a broad definition of dealer.” The SEC’s voluntary dismissal now ends the legal battle, which the two crypto industry advocacy groups jointly filed in April. “Complete and total victory today in our case against the SEC over the dealer rule,” Blockchain Association CEO Kristin Smith
said in a Feb. 19 X post.
“The crypto industry can breathe a sigh of relief.” US President Donald Trump has overhauled the agency after Gensler’s departure with a focus on rolling back its crypto-related enforcement and litigation. Trump tapped acting chair Mark Uyeda while his nominee to lead the SEC,
Paul Atkins, weaves through congressional approvals.
So far, under Uyeda, the SEC has created a
Crypto Task Force headed by the crypto-friendly Commissioner Hester Peirce, dedicated to making a framework for digital assets. The agency has also
delayed or paused litigation against crypto firms launched under Gensler’s leadership, seemingly with the aim to reconsider the actions after advice from the Crypto Task Force.