The Blockchain Association, a prominent crypto industry lobbying group, has taken legal action against the U.S. Securities and Exchange Commission (SEC) in its ongoing battle against government regulators. The association filed a lawsuit on Tuesday in Texas, challenging the SEC’s expansion of the definition of “dealer” to include decentralized finance (DeFi) users and projects.
The rule change, which was announced in February, requires DeFi protocols and transactions to register as securities exchanges and brokers or face legal consequences. However, the SEC has not provided guidance on how DeFi projects, which operate autonomously without human oversight, can comply with regulations designed for traditional stock exchanges. Additionally, the expanded definition could treat some DeFi traders as professional stock brokers.
The crypto community has criticized the SEC’s regulatory overreach, with SEC Commissioner Hester Peirce, known for her support of the crypto industry, condemning the rule change as detrimental to market participants and the broader market. The Blockchain Association, in collaboration with the Crypto Freedom Alliance of Texas, has filed the lawsuit seeking a declaratory judgment from a federal court. The association argues that the SEC’s expansion of the dealer definition violates the Administrative Procedures Act (APA).
The lawsuit alleges that the SEC has not only overstepped its regulatory authority in the crypto industry but has also failed to consider complaints and comments from crypto groups during the rule-making process.