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The Blockchain Association and the Crypto Freedom Alliance of Texas have taken legal action against the U.S. SEC.
The two groups contend that the SEC is instituting a new rule, adopted in February, that would negatively impact the crypto industry. The SEC’s rule extends federal securities laws to market participants with significant liquidity-providing roles, encompassing cryptocurrency transactions.
The complaint, filed on Monday in a Texas district court, cites violations of the Administrative Procedures Act (APA), which governs federal agency rulemaking.
“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,” said Blockchain Association CEO Kristin Smith.
The rule applies to crypto assets that meet the definition of securities or government securities, with exceptions for assets valued under $50 million, including defi.
The new SEC rule received significant backlash from crypto industry groups.
Today, BA and CFAT filed a suit against the SEC asking the court to strike down their arbitrarily applied and unclear Dealer Rule expansion. This rule stifles innovation, harms the burgeoning digital asset industry, and emboldens the SEC to lead by unwritten rules and guidance.… pic.twitter.com/3xIMJIAwyP
— Blockchain Association (@BlockchainAssn) April 23, 2024“In short, the Commission inexplicably refused to exempt the digital assets industry or to coherently explain how and when the rule would apply to those novel markets,” noted the complaint filed by the Blockchain Association and the Crypto Freedom Alliance of Texas.
The SEC justified its actions by asserting that it conducts rulemaking in accordance with its mandates and the legal framework governing administrative procedures and intends to vigorously uphold the final dealer rules in court.
The lawsuit adds to a series of legal challenges against the SEC over the past year. In February, the Crypto Freedom Alliance of Texas and digital asset company LEJILEX sued the SEC alongside each other, alleging unlawful targeting of the crypto industry.
Additionally, the DeFi Education Fund and a Texas Apparel Company, Beba, took the SEC to court last month over APA violations. Last year, crypto exchange Coinbase sued the SEC for clarity on its rulemaking petition.
