The SEC voluntarily withdrew its appeal against expanding regulation to DeFi, marking a significant victory for the crypto industry.
What Just Happened?
The SEC proposed an expanded 'dealer' definition requiring DeFi protocols and liquidity providers to register as exchanges. However, in November 2024, a Texas federal court struck down this rule, citing it as untethered from existing laws. The SEC quietly withdrew its appeal in February 2025.
Why Did the SEC Back Down?
The strong court ruling highlighted the SEC's overreach of authority. With Gary Gensler's departure, acting Chair Mark Uyeda, alongside crypto-friendly Commissioner Hester Peirce, may pursue a more cooperative regulatory approach, influenced by industry and political pressures.
What This Means for Crypto and DeFi
DeFi protocols are not required to register as dealers. Although uncertainty remains, this development may attract more institutional investment. It hints at a shift towards more constructive regulation.
The SEC's withdrawal offers an opportunity for more open and transparent dialogues between regulators and the crypto community, fostering innovation and growth.
