Crypto Lobbyists File Lawsuit Against SEC Over Definition of 'Distributor'

The Blockchain Association and the crypto Freedom Alliance of Texas have taken legal action against the US SEC.

The two groups maintain that the SEC is instituting a new rule, adopted in February, that would negatively impact the crypto industry. The SEC rule extends federal securities laws to market participants with important liquidity provision functions, encompassing cryptocurrency transactions.

He complaintfiled Monday in a Texas district court, cites violations of the Administrative Procedures Act (APA), which governs rulemaking by federal agencies.

“Before this rabid regulator can do more damage, we seek declaratory judgment and injunctive relief against the SEC to reverse the expansion of its rules and prohibit their use against our industry.” crypto-freedom-alliance-of-texas-file-lawsuit-challenging-secs-unlawful-dealer-rule-that-threatens-american-industry-and-innovation/” data-type=”link” data-id=”https://theblockchainassociation.org/blockchainassociation-and-crypto-freedom-alliance-of-texas-file-lawsuit-challenging-secs-unlawful-dealer-rule-that-threatens-american-industry-and-innovation/” target=”_blank” rel=””>saying Kristin Smith, CEO of the Blockchain Association.

The rule applies to crypto assets that meet the definition of securities or government securities, with exceptions for assets valued at less than $50 million, including defi.

The new SEC rule received significant backlash from crypto industry groups.

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“In short, the Commission inexplicably refused to exempt the digital asset industry or to coherently explain how and when the rule would apply to these novel markets,” states the complaint filed by the Blockchain Association and the crypto Freedom Alliance of Texas.

The SEC justified its actions by stating that it conducts rulemaking in accordance with its mandates and the legal framework governing administrative procedures and intends to vigorously defend the final rules for dealers in court.

The lawsuit adds to a series of legal challenges against the SEC over the past year. In February, Texas-based crypto Freedom Alliance and digital asset company LEJILEX sued the SEC together, alleging unlawful attacks on the crypto industry.

Additionally, the DeFi Education Fund and a Texas clothing company, Beba, took the SEC to court last month for violations of the APA. Last year, cryptocurrency exchange Coinbase sued the SEC seeking clarity in its regulatory request.