- The SEC has officially withdrawn its appeal against a Court ruling that blocked its attempt to redefine “dealers” in financial markets.
- The decision marks a legal win for DeFi and crypto advocacy groups, preventing strict regulations on liquidity providers and market makers.
- With new leadership and a dedicated Crypto Task Force, the SEC is signaling a shift toward clearer and more favorable crypto policies.
The U.S. Securities and Exchange Commission (SEC) dropped its appeal of a court ruling that had halted a controversial broker-dealer regulation. The move is a major victory for crypto and decentralized finance (DeFi) advocacy groups, a turn of regulatory momentum.
On February 19th, the SEC filed a brief motion with the Fifth Circuit Court of Appeals stating that it was “voluntarily dismissing this appeal.” The ruling comes after a court battle initiated by the Blockchain Association and the Crypto Freedom Alliance of Texas, which opposed the SEC’s attempt to expand its jurisdiction among crypto market participants.
The case concerned a proposed rule that tried to redefine a “dealer” in financial markets. If the rule had gone into effect, crypto market makers and automated market makers with a net worth of over $50 million would have had to register with the Securities and Exchange Commission. The industry associations claimed that the rule would have been impossible to implement within the decentralized ecosystem, where many protocols are being run without a central entity.
In November, the crypto sector was favored by the ruling of Texas District Judge Reed O’Connor that the Securities and Exchange Commission had gone beyond the statutory limits by expanding the meaning of a dealer. The ruling was a turning point that saved the DeFi protocols from possibly suffocating regulative conditions.
Despite the ruling, Securities and Exchange Commission, with then-Chair Gary Gensler at the time, attempted to appeal the ruling days before leaving the commission. However, with the agency itself withdrawing the appeal, the court case is finally at a close.
Crypto’s Big Win as SEC Backs Down
Securities and Exchange Commission’s withdrawal coincides with a wider trend of crypto regulation amid President Donald Trump’s reorganization of the agency. Trump appointed Mark Uyeda to serve as acting chairman following Gensler’s resignation, with Paul Atkins, a crypto-friendly appointee, still awaiting congressional confirmation to assume the chairman’s role permanently.
One of Uyeda’s first moves was Commissioner Hester Peirce’s appointment of a Crypto Task Force, a vocal ally of friendlier and less cumbersome digital currency policies. With the change of administration, the Securities and Exchange Commission also shelved or slowed down a number of lawsuits filed while Gensler was commissioner, implying a reassessment of prior enforcement actions.
The SEC’s decision to drop the appeal is being greeted with overwhelming support within the crypto community. In a post on X (previously Twitter), the CEO of the Blockchain Association declared the ruling a “complete and total victory,” insisting that the industry can breathe a little easier.
With the relief of the pressure of regulation and a crypto-friendly SEC administration emerging into the scene, the fate of DeFi and digital assets in the U.S. is all set to enter a new arena-one that will enhance innovation rather than restrain it. However, the eventual impact of the change is to be felt while the industry is still coming to terms with an evolving legal landscape.
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