Marisa
@mtcoppel
Today is the 1 week anniversary of @blockchainassn filing its first lawsuit against the SEC - challenging the dealer rule. It's unfortunate that it's come to this, but we're excited to defend our members and the industry alongside our co-plaintiff, the Crypto Freedom Alliance of Texas. https://t.co/JnWZcKVXzO
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Marisa
@mtcoppel
We raise several APA claims centering on the SEC’s unlawful redefining of the term “dealer.” By statute, the courts, and the SEC’s own interpretation, being a “dealer” previously turned on the specific services offered to customers. The SEC has flipped this on its head.
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Marisa
@mtcoppel
Now, the redefined term doesn’t factor in a customer relationship and focuses entirely on whether a person’s activity has the post hoc effect of providing liquidity. The rule violates the APA by exceeding the SEC’s statutory authority and failing to contain proper analysis.
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Marisa
@mtcoppel
The rule has a majorly detrimental impact on the digital asset ecosystem, particularly DeFi – pulling in liquidity providers and DeFi software and its developers, although it is vague and unclear. Requiring intermediation of DeFi protocols defeats the purpose of DeFi.
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Marisa
@mtcoppel
The new rule introduces two tests to identify dealers, both focus on the effect of trading activity rather than focusing on a customer relationship. Again, this is a drastic departure from any previous SEC interpretation of the term “dealer.”
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Marisa
@mtcoppel
The SEC goes further – even if a participant’s trading activity doesn’t meet either test to be a dealer, they still cannot presume to be free from liability for failure to register as a one. So there’s this third, undefined, test too…
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Marisa
@mtcoppel
Commenters raised dozens of concerns that the SEC fails to address, in violation of the APA. For instance, the new rule would drain liquidity from markets and generally deter interaction with DeFi protocols. The SEC’s response to which can best be described as a shrug.
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Marisa
@mtcoppel
And, the SEC fails to clarify a key threshold issue despite commenters asking for clarification: how to determine which crypto asset transactions qualify as securities transactions. This makes it even harder for industry to determine whether compliance is necessary.
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