According to the plaintiffs, the SEC has violated the Administrative Procedures Act (ADA), which governs the process of rulemaking by federal agencies.
In February, the SEC adopted rules that require market participants who provide liquidity to comply with federal securities laws, including those related to cryptocurrencies. These new regulations will be applicable to all users engaging in transactions, except for those with assets worth less than $50 million.
Kristin Smith, CEO of the Blockchain Association, stated that the SEC went beyond its authority in defining dealers and disregarded concerns from stakeholders about the impact of the rules on digital assets and decentralized finance (DeFi).
“This excessive regulation could do more harm than good to the crypto industry. We are seeking an injunction against the SEC to prevent the agency from expanding securities regulations to cover crypto assets and using its powers against the industry. The SEC has failed to provide clear explanations on how and when the rules will be applied to the cryptocurrency market,” Smith explained regarding the lawsuit.
A spokesperson from the SEC responded by stating that the agency is developing regulations within its jurisdiction and is ready to defend the rules for dealers in court.
In February, Lejilex and CFAT also filed a lawsuit against the SEC, alleging abuse of power.