Freedom

DeFi

Gary

Northern

A federal court in Texas has struck down a Securities and Exchange Commission rule that expanded the definition of a broker to include decentralized finance platforms and other crypto entities.&nbsp;
The <a href="https://crypto.news/the-sec-and-crypto-regulation-why-the-delay-in-rulemaking/" target="_blank" rel="noopener noreferrer nofollow">SEC’s broker-dealer rule</a>, finalized in February 2024, aimed to bring liquidity providers and automated market makers with over $50 million in capital under its oversight.
Critics argued that the rule overreached the <a href="https://crypto.news/tag/sec/" target="_blank" rel="noopener noreferrer nofollow">SEC’s</a> authority and would impose unworkable requirements, such as enforcing <a href="https://crypto.news/tag/kyc" target="_blank" rel="noopener noreferrer nofollow">Know Your Customer</a> and <a href="https://crypto.news/tag/aml" target="_blank" rel="noopener noreferrer nofollow">Anti-Money Laundering</a> regulations, on decentralized platforms without central operators.
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<h2 class="wp-block-heading" id="untethered-authority">“Untethered” authority</h2>
Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas <a rel="noopener noreferrer nofollow" href="https://x.com/MTCoppel/status/1859638712575164664/photo/1" target="_blank">ruled</a> that the SEC had exceeded its statutory authority. He described the rule as “untethered” from U.S. securities law.&nbsp;
Industry groups, including the Blockchain Association and the Crypto Freedom Alliance of Texas, <a rel="noopener noreferrer nofollow" href="https://crypto.news/crypto-lobbyists-file-lawsuit-against-sec-on-dealer-definition/">brought the lawsuit</a>, claiming the rule stifled innovation and hurt decentralized platforms.
With SEC Chair Gary Gensler announcing his resignation amid mounting <a rel="noopener noreferrer nofollow" href="https://crypto.news/18-gop-ags-sue-sec-as-gensler-hints-resignation/">legal challenges</a>, the agency’s future approach to crypto regulation is uncertain.
Although the SEC may appeal the decision, the ruling is a significant setback as the agency continues to navigate how to regulate the fast-evolving crypto sector.
This legal outcome underscores the ongoing conflict between traditional financial regulations and blockchain-based technologies. Critics of the SEC’s approach contend that applying conventional rules to DeFi platforms could hinder innovation and the growth of decentralized financial systems. 
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Another SEC loss: Judge rejects rule targeting crypto brokers

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