US Securities and Exchange Commission (SEC) had allegedly struggled to provide clear crypto linked regulations to the industry. The new move taken by two prominent crypto industry groups suggests that there might be more problems emerging ahead for the top financial watchdog in delivering clarity over the matter.
Crypto groups go after SEC
The Blockchain Association and the Crypto Freedom Alliance of Texas moved ahead to a lawsuit against the US SEC. The action comes over the watchdog’s recent rule that expands the definition of a “dealer” in securities.
As per the complaint filed in a federal court in Texas, the groups had argued that the SEC had overstepped its authority and implemented a rule that was both arbitrary and capricious. They argue that the new rule is overly vague. It added that the mentioned rule is broad in scope, and fails to clarify its impact on participants in the crypto market. This particularly those involved in decentralized finance (DeFi).
It highlighted that under the new rule, developers of automated software and liquidity providers on certain trading protocols could be classified as “dealers.” The rule subjects them to new regulatory burdens as this includes additional capital and registration requirements.
The two prominent crypto industry groups seek to strike down the SEC’s Dealer Rule alleging violations of the Administrative Procedure Act (APA). As mentioned, they claim that the commission has unlawfully expanded its interpretation of the term “dealer.” It was originally defined in the Securities Exchange Act of 1934.
Watchdog in trouble?
This lawsuit can turn out to be trouble for the US SEC as it is already facing multiple legal challenges for some biggest of the crypto players. Coinbase, the US’s biggest crypto exchange is fighting to seek clear guidance from the commission.
Ripple is locked in a long legal battle with the SEC which is expected to give out a much need clarity for the crypto industry. However, a delay in proceeding has kept the market on its toes.
The complaint filed by The Blockchain Association and the Crypto Freedom Alliance of Texas argues that the SEC’s expanded definition deviates from the long-standing and well-established understanding of the term “dealer.”
It is expected to cause irreparable harm to the millions of Americans and businesses engaged in digital asset trading. The SEC allegedly failed to engage with comments and questions from industry participants about the rule’s implications for this sector.