Just In: US SEC Withdraws Dealer Rule Appeal After Court Rejects Overreach

The U.S. Securities and Exchange Commission (SEC), under acting chair Mark Uyeda, has withdrawn its appeal in the lawsuit over its dealer rule expansion. The move follows a Texas court ruling that struck down the rule, calling it “untethered” from existing laws. The lawsuit was brought by the Blockchain Association and the Crypto Freedom Alliance of Texas (CFAT) in April 2024.

The decision marks a victory for the crypto industry, which viewed the rule as an attempt to impose regulatory control over certain trading firms. The withdrawal signals a shift in the SEC’s enforcement strategy under new leadership.

US SEC Ends Legal Battle Over Dealer Rule

The SEC’s dealer rule sought to expand the definition of a dealer to include high-frequency trading firms and specific crypto hedge funds. Industry groups argued that the rule was an indirect attempt to regulate crypto trading platforms without congressional approval.

A Texas court struck down the rule, stating that it exceeded the SEC’s authority. The SEC initially appealed the decision but has now voluntarily dismissed the appeal. The withdrawal ensures that the dealer rule will not take effect.

Blockchain Association CEO Kristin Smith welcomed the decision, stating, “We first brought this lawsuit to challenge the agency’s unlawful power grab. With today’s final dismissal, we look forward to constructive discussions with the SEC.”

Industry Sees Ruling as a Turning Point

Crypto industry groups viewed the court ruling as a pushback against regulatory overreach. The Blockchain Association and CFAT argued that the SEC’s actions lacked a legal basis and imposed unnecessary restrictions on the digital asset industry.

BA Head of Legal Marisa Coppel emphasized the importance of legal action in protecting innovation. “Litigation is a critical tool to defend the industry against regulatory overreach,” she said. “This victory benefits entrepreneurs, investors, and builders across America.”

The ruling is expected to influence future SEC rulemaking efforts, particularly those affecting digital assets and financial markets. Industry leaders are now calling for a clearer regulatory framework to support growth and compliance.

SEC Shifts Enforcement Strategy Under New Leadership

The SEC’s decision to drop the appeal reflects a broader shift in its approach to crypto enforcement. Under former Chair Gary Gensler, the agency pursued strict regulations on digital assets, leading to multiple legal battles with industry participants.

Former SEC official John Reed Stark noted that recent delays in the agency’s cases against Coinbase and Binance suggest a change in direction. He pointed out that key SEC trial lawyers have been reassigned, signaling a possible move toward settlements or case dismissals.

Meanwhile, Congress is working on new digital asset regulations, with industry leaders supporting clearer guidelines. Coinbase CEO Brian Armstrong has expressed optimism about the regulatory progress, emphasizing the need for rules that protect consumers while fostering innovation.

Ripple Lawsuit Continues as SEC Prioritizes Other Cases

While the SEC has withdrawn its appeal in the dealer rule case, its lawsuit against Ripple remains active. Legal analysts suggest that the agency has been prioritizing cases with imminent deadlines, which may explain the lack of a pause request in the Ripple case.

Journalist Eleanor Terrett reported that Ripple’s next court deadline is April 16, when it must file its opening brief. The case continues to be closely watched as a key legal battle in the crypto sector.

With the SEC stepping back from certain legal fights, the crypto industry is pushing for a balanced regulatory framework. The latest developments indicate that policymakers may take a different approach to digital asset oversight moving forward.