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Date 2024-04-25

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Crypto Groups Sue the SEC Over "Misguided Attacks" On Crypto Industry
In a bold move against what they perceive as regulatory overreach, two prominent cryptocurrency associations in the
United States, the Blockchain Association (BA) and the CryptoFreedom Alliance of Texas (CFAT), have initiated legal action
against the Securities and Exchange Commission (SEC).
The lawsuit initiated on 23rd April, alleges that the SEC's recent actions amount to "capricious rulemaking" and "misguided
attacks" on the burgeoning digital asset industry.
Notably, central to the lawsuit is the challenge against the SEC's Dealer Rule, which the plaintiffs argue violates the
Administrative Procedure Act (APA) due to its ambiguous and expansive interpretation of the term "dealer." This
interpretation, they claim, has strayed far from its traditional understanding, potentially endangering the operations of
countless individuals and businesses involved in digital asset trading.
The SEC's approval of rules in February for the oversight of dealers, encompassing a broader range of financial transactions
including cryptocurrencies, has been a point of contention. Under these new provisions, market participants overseeing
assets exceeding $50 million are mandated to register with the agency. However, the plaintiffs assert that the SEC has
failed to adequately address industry inquiries regarding the application of this expanded definition to the crypto sphere.
According to the lawsuit, the redefined scope of the term "dealer" is excessively broad, encompassing entities that bear
little resemblance to traditional dealers as commonly understood. BA CEO Christine Smith cautioned that the SEC's actions
not only advance an anti-digital asset agenda but also unlawfully redefine the agency's statutory authority, potentially
driving American companies offshore and stifling domestic innovation.
The lawsuit comes amidst growing concerns within the cryptocurrency community regarding regulatory uncertainty and
government overreach. Analysts at investment bank Berenberg previously predicted that stablecoins and decentralized
finance (DeFi) would be the next targets of SEC scrutiny. Indeed, in September 2023, the SEC's head of enforcement, David
Hirsch, hinted at investigations into centralized exchanges and DeFi protocols for possible legal infractions.
Recent warnings issued by the SEC to major decentralized exchange (DEX) Uniswap in April 2024 have only heightened
tensions within the industry. The threat of legal action against Uniswap underscores the regulatory pressure facing key
players in the cryptocurrency ecosystem.
That said as the legal battle between crypto groups and the SEC unfolds, the outcome of this lawsuit could have far-
reaching implications for the future of cryptocurrency regulation in the United States and beyond.

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