The Blockchain Association and the Crypto Freedom Alliance (CFAT) of Texas, two well-known organizations in the cryptocurrency space, have sued the US Securities and Exchange Commission (SEC) to challenge a recently enacted rule that broadens the definition of a "dealer" in securities.
The SEC allegedly went beyond its jurisdiction and adopted an arbitrary and capricious rule, according to the complaint, which was filed in a federal court in Texas.
The cryptocurrency industry sues the SEC
The cryptocurrency companies contend in the lawsuit that the new rule is "vague, overly broad" and that it does not make clear what it means for those involved in the crypto market.
Developers of automated software and liquidity providers for specific trading protocols may be considered "dealers" under the SEC rule, which could lead to increased costs and additional regulatory requirements.
The complaint additionally argues that industry participants are prevented from operating under rules that are clearly disclosed and developed through an equitable and transparent rulemaking process by the SEC's implementation of the Dealer Rule, which is in violation of the Administrative Procedure Act (APA).
The complaint claims that the Securities Exchange Act of 1934's definition of "dealer," as used by the SEC, is a "unlawful and radical expansion" that deviates from the term's long-standing and "well-established meaning."
The law will create "irreparable harm" to the millions of Americans and businesses engaged in digital asset trading, the complaint further warns. The two cryptocurrency companies further claim that the SEC violated the law by failing to evaluate the advantages and disadvantages of their strategy and by failing to sufficiently address concerns expressed during the comment period.
CEO Crises Regulatory Overreach by SEC
Kristin Smith, CEO of the Blockchain Association, chastised the SEC for regulatory overreach and failing to address industry concerns during a rushed comment session. Smith said:
The Dealer Rule illegally expands the SEC's statutory authority granted by Congress while advancing its anti-digital asset campaign. It scares American inventors and threatens to push US companies abroad.
Smith underlined the dedication of the Texas Crypto Freedom Alliance and the Blockchain Association to safeguarding the digital asset ecosystem in the United States.
In the end, the action aims to reverse the SEC's rule expansion and stop its implementation in the sector by requesting a declaratory judgment and injunctive relief.
The continuous fight to provide a clear regulatory framework for the developing digital asset market is highlighted by the legal dispute between the SEC and groups representing the cryptocurrency industry.
The case's conclusion may have a big impact on the industry's future as well as how innovation and regulatory control are balanced in the US as it develops.
April 2024, Cryptoniteuae