A Texas judge tossed 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 “who engage in certain dealer roles,” like providing liquidity, to register with the Commission and comply with federal securities law.
Private fund managers, alternative asset managers and crypto firms blasted the new rule, painting it as an overly broad regulatory overreach that expanded the SEC’s authority.
In March, trade 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 against the SEC in both lawsuits and vacated the new rule in its entirety.
Explains the judge,
“The Rule as it currently stands de facto removes the distinction between ‘trader’ and ‘dealer’ as they have commonly been defined for nearly 100 years. The Court refuses to allow such a broad expansion of the Exchange Act by way of this Rule. In addition to the reasons provided in the Related Case, the Court concludes that the Dealer Rule impermissibly exceeds the SEC’s statutory authority.”
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