In a significant victory for the crypto industry, a federal judge in Texas ruled against the U.S. Securities and Exchange Commission (SEC) in a lawsuit challenging the regulator’s broad definition of “dealer.” The ruling, delivered by Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas, marks another blow to the SEC’s regulatory power over the crypto space.
The lawsuit was filed by the Blockchain Association and the Crypto Freedom for Alliance of Texas, which contested the SEC’s inclusion of crypto entities under the term “dealer.” The SEC had used this designation to regulate entities involved in buying and selling securities, but the plaintiffs argued that the term was being applied too broadly, threatening the growth of the cryptocurrency and decentralized finance (DeFi) sectors.
Judge O’Connor agreed with the plaintiffs, stating that the SEC had exceeded its statutory authority by creating a definition of “dealer” that was not supported by the text, history, or structure of the Securities Exchange Act. The judge’s ruling emphasized that such an expansive interpretation could stifle market development and innovation in the crypto industry.
This legal victory comes at a pivotal moment for the SEC, as the regulator faces increasing criticism for its enforcement-driven approach under Chairman Gary Gensler. With Gensler’s resignation set for January 20, 2025, the crypto industry is watching closely to see who will take the helm next. Industry experts are hopeful that the new leadership will bring more clarity and a balanced regulatory approach, addressing concerns over overreach.
The case revolves around Rule 3a5-4, which defines a dealer as anyone who engages in a regular pattern of buying and selling securities to provide liquidity to other market participants. This rule had been applied to crypto entities, making them susceptible to increased scrutiny and enforcement actions.
With the SEC facing setbacks in court and leadership changes on the horizon, the crypto industry is optimistic that the regulatory landscape may shift toward a more favorable environment. As Gary Gensler prepares to step down, names like Paul Atkins have emerged as potential successors, with crypto advocates eager to see how the next SEC chair will approach digital asset regulation.
Related topics:
Binance Expands Support for ACT, NEIRO, and PNUT: Will Prices Surge Further?
XRP Price Soars Amid SEC Chair Resignation Speculation and Ripple’s Court Victory
18 U.S. States Sue SEC Over Alleged Constitutional Overreach in Crypto Regulation
