In a bold move, the Blockchain Association and the Crypto Freedom Alliance of Texas have decided to take legal action against the US Securities and Exchange Commission (SEC). Their argument revolves around the SEC sanctioning a rule that redefines the parameters for what constitutes a “dealer” of securities. According to these groups, the SEC’s actions were deemed “arbitrary and capricious” and violated the Administrative Procedure Act (APA).
The CEO of the Blockchain Association, Kristin Smith, expressed strong opinions about the rule, calling it the SEC’s attempt to unlawfully regulate outside its authority. She highlighted that the rule not only advances the SEC’s anti-digital asset agenda but also redefines the boundaries of its statutory authority granted by Congress. Smith emphasized that such actions could drive U.S. companies offshore and instill fear in American innovators, ultimately hindering the growth of the digital asset ecosystem.
Marissa Tashman Coppel, the legal lead at Blockchain Association, brought attention to the adverse effects of the SEC’s rule on the digital asset ecosystem, particularly decentralized finance (DeFi). She pointed out that the lack of clarity in the rule could potentially implicate liquidity providers, DeFi software, and developers. Coppel criticized the introduction of new tests to identify dealers, focusing on trading activity rather than customer relationships, which deviates significantly from previous SEC interpretations.
Coppel highlighted that the SEC failed to address numerous concerns raised by industry stakeholders during the comment period. One of the critical issues overlooked by the SEC was the determination of which crypto asset transactions qualify as securities transactions. This lack of clarity makes it challenging for industry participants to assess the necessity of compliance with the new rule, further adding to the uncertainty and confusion within the digital asset space.
The Blockchain Association, backed by prominent crypto companies like Coinbase, Kraken, Circle, and Ripple, stands as a united front against the SEC’s overreach. Their legal battle challenges not only the specific rule in question but also aims to secure clearly communicated rules that have undergone a fair and transparent rulemaking process, allowing industry participants to operate without unnecessary legal ambiguity.
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