A Texas judge struck down the Securities and Exchange Commission’s (SEC) controversial “dealer rule,” handing crypto stakeholders a regulatory victory.
Earlier this year, the SEC adopted a new rule requiring market participants “engaged in certain dealer roles,” such as providing liquidity, to register with the Commission and comply with federal securities laws.
Private fund managers, alternative asset managers and crypto firms rejected the new rule, portraying it as an overly broad scope of regulation that expanded the SEC’s authority.
In March, industry associations representing private fund managers, alternative asset managers and managed funds filed a lawsuit against the SEC in the U.S. District Court for the Northern District of Texas.
Crypto stakeholders, represented by the Crypto Freedom Alliance of Texas (CFAT) and the Blockchain Association (BA), launched a similar legal action in the same district the following month.
This week, U.S. District Judge Reed O’Connor sided with the SEC in both lawsuits and struck down the new rule in its entirety.
The judge explains
“The Rule as it stands now de facto eliminates the distinction between ‘merchant’ and ‘dealer’ as they have been commonly defined for almost 100 years. The Court declines to allow such a broad expansion of the Exchange Act through this rule. In addition to the reasons given in the related case, the Court concludes that the Dealer Rule impermissibly exceeds the SEC’s statutory authority.”
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