In recent months, the Securities and Exchange Commission (SEC) headed by Gary Gensler has come under fire for its “regulation by enforcement” policy, and many are searching for clarity on the matter. encryption rules.
Today, the cryptocurrency industry moved a few steps toward clarity when a federal judge in Texas decided Shed the broker-dealer rule for the agency. According to the definition proposed by the SEC, the term “dealer” includes all liquidity providers and market makers with capital greater than $50 million.
According to Texas State Judge Reed O’Connor, the agency exceeded its authority by adopting a broad definition of the term “trader” that has no relation to the letter, structure, and spirit of the Exchange Act.
The legal win was applauded by the cryptocurrency community, with Marissa Tashman Coppell of the Blockchain Association calling it a massive win for this growing industry.
The merchant base has fallen! The SEC exceeded its statutory authority. A huge win for the entire industry @BlockchainAssn and @CryptoFreedomTX !!! pic.twitter.com/Zv1Mhv1uwl
– Marissa Tashman Coppel (MTCoppel) November 21, 2024
The Securities and Exchange Commission (SEC) offers an expanded definition of broker-dealer
On February 6, 2024, the SEC adopted new rules for market participants and updated the definition of broker/dealer. Under the agency’s revised rules, market participants with capital of more than $50 million must register as securities dealers or dealers.
At the time of publication of the rules, more than 40 market participants must register and submit to the broker definition and regulations.
As of today, the market cap of cryptocurrencies reached $3.24 trillion. Chart: TradingView
According to critics and observers, the SEC overstepped its authority and set unrealistic requirements. For example, critics have criticized the agency for enforcing know-your-customer (KYC) protocol, even on decentralized platforms that have no central operators.
Abuse of power, says the judge
O’Connor ruled that the agency abused its authority. The district court judge further clarified that the dealing rules proposed by the SEC are “unconstrained” by the country’s securities laws.
Critics submitted their images Complaints in court after the SEC officially updated the definitions last February 2024. The Cryptocurrency Freedom Coalition and the Blockchain Association are the two organizations that initiated the complaint against the agency.
Uncertain times for the SEC
The SEC faces uncertain times, especially now that Chairman Gary Gensler has already announced his decision Intention to resign. In a post on Twitter/X dated November 22, Gensler announced that he will step down from his position on January 20, 2025. With Gensler’s resignation and legal challenges, the SEC’s approach to cryptocurrencies remains uncertain.
On January 20, 2025, I will step down from my position @SECGov chair.
Thread 🧵⬇️
– Gary Gensler (@GaryGensler) November 21, 2024
O’Connor’s ruling is the latest challenge and setback for the SEC. While the agency can still appeal this ruling to the Fifth Circuit Court of Appeals, the decision represents a major blow. Cryptocurrency support has won on clarifying the definition of a trader, and with incoming US President Donald Trump taking office, the industry can expect friendlier policies soon.
Featured image from DALL-E, chart from TradingView