Blockchain Association, Crypto Freedom Alliance File Suit Against SEC Over 'Dealer' Definition

The Blockchain Association and Crypto Freedom Alliance of Texas have initiated legal action against the SEC, challenging its new rule that redefines "dealer" of securities. They argue that the SEC exceeded its authority in passing the rule without proper transparency and process, violating the Administrative Procedure Act. The rule, according to Blockchain Association CEO Kristin Smith, is part of the SEC's "anti-digital asset crusade" and threatens to harm US companies and stifle innovation.

Blockchain Association and Crypto Freedom Alliance Sue SEC over Dealer Rule

In a landmark lawsuit filed on April 23, the Blockchain Association and the Crypto Freedom Alliance of Texas have initiated legal proceedings against the United States Securities and Exchange Commission (SEC). The suit alleges that the SEC has exceeded its authority by enacting a rule that redefines the criteria for determining what constitutes a "dealer" of securities, a move that the plaintiffs argue is both "arbitrary and capricious" and in violation of the Administrative Procedure Act (APA).

According to the complaint, the SEC's Dealer Rule represents an unwarranted expansion of its regulatory authority beyond the parameters established by Congress. The plaintiffs contend that the rule's redefinition of "dealer" was not supported by adequate evidence or analysis and was adopted without proper notice and comment, depriving industry participants of the opportunity to provide meaningful input.

Kristin Smith, CEO of the Blockchain Association, has condemned the rule as the latest instance of the SEC's "blatant attempts to unlawfully regulate outside its authority." She asserts that the rule "skirts legal obligations" and threatens to drive U.S. companies offshore while stifling innovation within the domestic cryptocurrency sector.

The lawsuit specifically seeks to invalidate the SEC's Dealer Rule on the grounds that the agency's violations of the APA have prevented industry participants from operating under clear and transparent rules. The plaintiffs argue that the rule's flawed rulemaking process has created uncertainty and confusion within the crypto industry, hampering its ability to flourish and contribute to the U.S. economy.

The lawsuit highlights the ongoing tensions between the SEC and the burgeoning cryptocurrency industry. The SEC has been criticized for its perceived heavy-handed approach to regulating digital assets, which some believe has hindered the development of the sector in the United States. The Blockchain Association and the Crypto Freedom Alliance are seeking to challenge this approach through legal action, arguing that the SEC's overreach is stifling innovation and undermining the growth of a promising industry.

The outcome of the lawsuit will have significant implications for the future of cryptocurrency regulation in the United States. If the plaintiffs prevail, it could limit the SEC's authority to define "dealer" and impede its ability to regulate certain aspects of the crypto market. Conversely, a victory for the SEC would further entrench its role as the primary regulator of digital assets, potentially giving it greater oversight over the industry's operations.

As the legal battle unfolds, industry observers will be closely monitoring the proceedings to determine how it will shape the regulatory landscape for cryptocurrency in the United States and beyond.