The US Securities and Exchange Commission (SEC) is currently the target of a lawsuit filed by the Texas Crypto Freedom Alliance and the Blockchain Association.
The complaint alleges that the authorities' recent expansion of the definition of “dealer” goes too far and could potentially arrest individuals simply trading cryptocurrencies.
Key Point:
- The SEC adopted expanding the definition of “dealer” in February after a 3-2 vote.
- According to the complaint, the SEC did not adequately respond to comments made during the rule's public comment period.
- The plaintiffs are asking the court to declare the rule “arbitrary, capricious, or in violation of law.”
- The CEO of the Blockchain Association said the rule is the latest example of the SEC trying to illegally regulate outside of its authority.
- The lawsuit also cites a lack of clarity about the definition of security and how it applies to digital assets.
The SEC's expanded definition of “dealer” could include a wide range of digital asset market participants, according to the complaint. This may also include users who only participate in digital asset liquidity pools.
Read more: Crypto.Com faces money laundering inspection, delays launch in South Korea
SEC initially considered excluding cryptocurrencies
In adopting the new rules, the SEC considered exempting certain aspects of cryptocurrencies or the crypto industry. However, authorities ultimately decided against this, saying it could give crypto dealers an unfair advantage over traditional lenders.
Blockchain Association CEO Kristin Smith issued a statement explaining the rules: “This is the latest example of the SEC's blatant attempt to illegally regulate outside its authority and avoid its legal obligation to address numerous concerns raised during the condensed comment period.”
Smith added that the rule advances the SEC's “anti-digital asset crusade” and unlawfully redefines the boundaries of its statutory authority granted by Congress.
Read more: Venezuelan National Oil Company converts to Tether (USDT) under US sanctions
The lawsuit also addresses another common complaint within the cryptocurrency industry. The definition of security and how it applies to digital assets is unclear.
Plaintiffs argue that the SEC has not clearly stated what types of digital asset transactions it considers to be securities transactions, creating significant uncertainty for the industry. Instead, authorities have taken an ad hoc approach by classifying certain digital assets as securities.
