Breaking: Blockchain Association and CFAT Sues SEC Over Dealer Rule

The Blockchain Association and the Crypto Freedom Alliance of Texas (CFAT) have filed a lawsuit against the U.S. Securities and Exchange Commission (SEC). The suit challenges a new rule that broadens the definition of a “dealer” in the realm of digital assets. Filed in the District Court for the Northern District of Texas, the legal challenge aims to overturn this expanded interpretation.

SEC Accused of Overreach in Digital Asset Regulation

The plaintiffs argue that the new definition could unfairly categorize mere digital asset traders as dealers. This concern arises from the rule’s focus on the effects of trading rather than the nature of the transactions themselves. They claim that the rule does not differentiate between dealers and individuals trading for their accounts, which is traditionally exempt from dealer status. The lawsuit alleges that the SEC bypassed necessary procedures by not thoroughly considering public feedback or conducting an economic analysis as required by law.

The Blockchain Association has expressed its disapproval, noting that the rule could encompass all participants in digital asset markets, including users who only participate in liquidity pools. They argue that this broad sweep is indicative of the SEC’s overreach in its regulatory attempts.

Blockchain Association Fights Warren’s Digital Asset Legislation

In February, the SEC approved the new dealer definition by a 3-2 vote, emphasizing a functional analysis of securities trading activities. The regulator defended its decision, stating that excluding cryptocurrency from this definition could grant crypto dealers an unfair advantage over traditional financial entities.

Critics have described the SEC’s approach to digital assets as inconsistent. The commission has yet to clearly define which digital asset transactions qualify as securities transactions, leading to uncertainty within the industry. Critics say the SEC utilizes ad hoc methods to classify digital assets as securities, contributing to regulatory confusion.

In related news, the Blockchain Association has also voiced concerns regarding Senator Elizabeth Warren‘s proposed legislation. The Digital Asset Anti-Money Laundering Act of 2023 has been criticized for potentially undermining U.S. competitiveness and economic stability. The association warns that such legislation could threaten thousands of American jobs and force U.S. companies to relocate offshore.

The lawsuit requests the court to declare the SEC’s rule as arbitrary, capricious, or contrary to law. It seeks to prevent the SEC from enforcing this rule, highlighting its potential to drive innovation out of the U.S.

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