News
by BSCN
February 20, 2025
Earlier, a lawsuit, led by the Blockchain Association and CFAT, challenged the SEC’s attempt to classify DeFi protocols as securities dealers.
The U.S. Securities and Exchange Commission (SEC) has voluntarily dismissed its appeal to expand securities laws to decentralized finance (DeFi). This marks a major victory for the crypto industry, as it signals a potential shift in regulatory approach under new leadership.
But why did the SEC back down, and what does it mean for DeFi, crypto firms, and investors? Let’s break it down.
The SEC had proposed an expanded definition of “dealer” that would have required DeFi protocols, market makers, and liquidity providers to register as securities exchanges and brokers. This move was widely seen as an attempt to impose traditional financial rules on decentralized platforms.
However, in November 2024, a Texas federal court struck down the SEC’s expanded rule, calling it “untethered” from existing laws. The lawsuit, brought by the Blockchain Association and the Crypto Freedom Alliance of Texas (CFAT), argued that the SEC overstepped its authority.
Instead of continuing the legal battle, the SEC quietly withdrew its appeal in February 2025, filing a motion to dismiss in the U.S. Fifth Circuit Court of Appeals. No opposition was raised, effectively sealing the decision.
This decision ensures that DeFi protocols, liquidity providers, and automated market makers won’t be forced to register as securities dealers—at least for now.
While this dismissal is a win, it doesn’t mean the SEC is stepping away from crypto regulation entirely. Future rules could still impact the industry, but the approach may be more measured.
With regulatory clarity improving, more institutional investors may enter the DeFi space, reducing fears of sudden regulatory crackdowns.
Instead of lawsuits and enforcement actions, the SEC may engage with the industry to create clearer, fairer rules for DeFi and crypto. This could lead to a more stable environment for innovation.
Disclaimer
Disclaimer: The views expressed in this article do not necessarily represent the views of BSCN. The information provided in this article is for educational and entertainment purposes only and should not be construed as investment advice, or advice of any kind. BSCN assumes no responsibility for any investment decisions made based on the information provided in this article. If you believe that the article should be amended, please reach out to the BSCN team by emailing [email protected].
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