The Blockchain Association and the Crypto Freedom Alliance of Texas have initiated legal action against the U.S. Securities and Exchange Commission (SEC), challenging a new rule that they argue could have detrimental effects on the cryptocurrency industry. The rule, adopted by the SEC in February, extends federal securities laws to participants in the crypto market who play significant roles in liquidity provision, potentially encompassing a wide range of cryptocurrency transactions.
Filed in a Texas district court on Monday, the complaint alleges violations of the Administrative Procedures Act (APA), which governs the process of federal agency rulemaking. Blockchain Association CEO Kristin Smith emphasized the urgency of the lawsuit, stating, “Before more harm can be done by this rabid regulator, we are seeking declaratory judgment and injunctive relief against the SEC to overturn their rule expansion and prohibit its use against our industry.”
The rule targets crypto assets that meet the definition of securities or government securities, with exemptions provided for assets valued under $50 million, including decentralized finance (DeFi) assets.
Critics within the crypto industry argue that the SEC’s rule lacks clarity and coherence, and they express concern over its potential impact on innovative markets. The complaint filed by the Blockchain Association and the Crypto Freedom Alliance of Texas asserts that the SEC failed to adequately exempt the digital assets industry and did not provide clear guidelines on when and how the rule would apply to novel markets.
In response, the SEC has defended its actions, stating that its rulemaking process adheres to its mandates and legal framework and asserting its intention to vigorously defend the final dealer rules in court.
This lawsuit adds to a series of legal challenges that the SEC has faced from the crypto industry over the past year. Previous lawsuits have alleged unlawful targeting of the crypto industry and violations of the APA. These legal battles highlight the ongoing regulatory uncertainty surrounding cryptocurrencies and the efforts of industry stakeholders to seek clarity and fairness in the regulatory landscape.
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