The U.S. Securities and Exchange Commission (SEC) has voluntarily dismissed its appeal to expand securities laws to decentralized finance (DeFi). This signals a potential shift in regulatory approach under new leadership.
What Just Happened?
The SEC had proposed an expanded definition of 'dealer' requiring DeFi protocols, market makers, and liquidity providers to register as securities exchanges and brokers. In November 2024, a federal court in Texas struck down this rule as inconsistent with existing laws. The SEC withdrew its appeal in February 2025, effectively closing the case.
Why Did the SEC Back Down?
The court ruling clearly stated that the SEC exceeded its authority. With Gary Gensler stepping down, the new SEC leadership under Mark Uyeda and the crypto-friendly Commissioner Hester Peirce has shown a tendency toward more constructive engagement with the industry. Additionally, industry and political pressure influenced the decision to withdraw the appeal.
What This Means for Crypto and DeFi?
The SEC's decision is a win for DeFi protocols and liquidity providers who remain free from mandatory registration as securities dealers. Despite the success, regulatory uncertainty persists, and future regulations may impact the industry. Greater regulatory clarity could attract more institutional investors to DeFi, while a constructive approach from the SEC could foster stable development.
The SEC's withdrawal of its appeal offers hope for clearer and fairer regulatory policies for DeFi and the crypto industry, potentially facilitating innovation and growth.
