SEC voluntarily dismisses appeal in case to push 'dealer rule' on crypto, DeFi

The U.S. Securities and Exchange Commission filed a motion on Wednesday to voluntarily dismiss its appeal of a ruling that limited its ability to apply securities laws to crypto and DeFi users. “Defendants-appellants Securities and Exchange Commission et al. hereby move to voluntarily dismiss this appeal, with each side to bear their own costs,” the agency said in its motion filed to the U.S. Court of Appeals for the Fifth Circuit.

The filing added that the counsel for the plaintiffs — Crypto Freedom Alliance of Texas and the Blockchain Association — indicated that they do not oppose the motion “Complete and total victory today in our case against the SEC over the dealer rule,” wrote Kristin Smith, the CEO of the Blockchain Association. “The future is bright for our industry. Let’s keep building.”

The appeal at issue was filed last month, against a November 2024 court decision that ruled against the SEC’s “dealer rule” that it voted to adopt back in February last year.

The dealer rule sought to require liquidity providers in crypto with over $50 million in capital to comply with federal securities laws, also including those in DeFi. This led the two crypto trade groups to sue the agency for the potentially “disastrous effects” on the industry.

The November ruling from a Texas federal court judge said that the SEC unlawfully overstepped its authority by expanding the definition of a "dealer." 

SEC Crypto 2.0

The SEC’s decision to rescind its appeal comes after a change in leadership to follow a more crypto-friendly path advocated by President Donald Trump.

January saw former chair Gary Gensler, who spearheaded multiple enforcement actions against crypto players, leave the agency to have pro-crypto commissioner Mark T. Uyeda assume his place as acting chair. Another crypto proponent and former regulator, Paul Atkins, was nominated by Trump as the next leader of the SEC.

The SEC quickly announced that it would pursue a new path of “SEC Crypto 2.0,” where “sensible” rules and more clarity in crypto regulation was said to be a high priority. The agency also formed a crypto task force, led by Commissioner Hester Peirce, currently determining which cryptocurrencies should not be classified as securities.

Earlier this month, Binance and the SEC filed a joint request to pause their legal dispute surrounding the agency’s claim of unregistered securities operations at Binance, potentially leading the agency to reassess its past legal actions against other crypto companies.