A Texas judge dealt the Securities and Exchange Commission (SEC) a major blow, invalidating its new “dealer rule” following lawsuits from crypto industry groups. This is a significant win for the crypto community.
The Controversial Rule
Earlier this year, the SEC introduced a rule requiring companies acting as “dealers” in securities markets – essentially providing liquidity – to register with the SEC and comply with federal securities laws. This included activities like facilitating trades.
The rule sparked outrage from various groups, including private fund managers, alternative asset managers, and crypto firms. They argued the rule was overly broad, granting the SEC excessive power and hindering innovation in the financial markets.
Lawsuits and the Ruling
Trade associations representing these groups filed a lawsuit against the SEC in Texas. The Crypto Freedom Alliance of Texas (CFAT) and the Blockchain Association (BA) also filed a separate but similar lawsuit.
This week, Judge Reed O’Connor sided with the plaintiffs, completely striking down the rule. The judge stated that the rule blurred the long-standing distinction between “traders” and “dealers,” effectively expanding the SEC’s authority beyond its legal limits. He concluded the SEC overstepped its authority in creating the rule.
What This Means
This decision is a major victory for the crypto industry, potentially limiting the SEC’s regulatory reach in the cryptocurrency space. It remains to be seen how the SEC will respond and whether it will appeal the ruling.
