According to CoinDesk, the U.S. District Court for the Northern District of Texas has invalidated the Securities and Exchange Commission's (SEC) rule that broadened the definition of a securities dealer to encompass more firms, including those in the cryptocurrency sector. This decision marks a significant legal setback for the SEC under Chair Gary Gensler, coinciding with his announcement of resignation effective January.
The court's ruling came in response to a lawsuit filed by the Blockchain Association and the Crypto Freedom Alliance of Texas. The judge, Reed O’Connor, criticized the SEC for overstepping its legal boundaries, stating that the agency exceeded its statutory authority by implementing a broad definition of a dealer that was not aligned with the Exchange Act's text, history, and structure. Consequently, the court ordered the rule, finalized in February, to be discarded.
An SEC spokesperson mentioned that the agency is reviewing the decision and will determine the appropriate next steps. The contested rule was part of several initiatives under Gensler's leadership aimed at asserting the SEC's regulatory authority over crypto businesses. The expanded dealer definition was criticized by the industry for being overly vague and imposing unrealistic demands on decentralized finance (DeFi) operations and crypto traders who did not provide dealer services.
The swift legal response from the court represents a notable victory for the crypto industry against the SEC, which has been actively pursuing legal actions against the sector. In his resignation announcement, Gensler highlighted the agency's efforts to protect investors and its legal successes in enforcing securities laws, despite the challenges posed by the evolving crypto landscape.
Kristin Smith, CEO of the Blockchain Association, hailed the court's decision as a triumph for the digital asset industry. She argued that the SEC's dealer rule was an unlawful attempt to extend its regulatory reach beyond the authority granted by Congress. With the court's ruling, the digital asset industry is shielded from what she described as an unlawful regulatory overreach by the SEC.