SEC Drops Appeal on Broker-Dealer Rule, Shifts Crypto Policy

• SEC Backs Down The SEC drops its appeal solidifying a legal win for crypto advocates and limiting regulatory overreach on DeFi
•  Crypto Policy Shift Leadership changes at the SEC bring a softer stance with a new task force shaping digital asset regulations
•  Legal Battles Remain While some crypto cases are halted major lawsuits against Ripple Kraken Coinbase and Binance are still in play

The United States Securities and Exchange Commission (SEC) has dropped its attempt to vacate a court order suspending a controversial broker-dealer rule. The decision wraps up a months-long court battle with cryptocurrency advocacy groups.

The rule sought to expand the SEC’s authority over decentralized finance (DeFi) protocols. However, a Texas court nullified it, stating that the SEC had overstepped its authority. Therefore, the regulator’s about-face represents a major shift in U.S. crypto policy.

SEC Withdraws Appeal, Industry Reacts

On February 19, the SEC voluntarily dismissed its appeal before the Fifth Circuit Court of Appeals. The move came unopposed, marking a decisive win for the Blockchain Association and the Crypto Freedom Alliance of Texas. These groups had challenged the SEC’s attempt to redefine the term “dealer.”

Previously, the SEC proposed that crypto liquidity providers and automated market makers with over $50 million in capital must register. However, critics argued that imposing such requirements on DeFi platforms was impractical. Many of these platforms lack a central authority, making compliance nearly impossible.

Texas District Court Judge Reed O’Connor ruled against the SEC in November. He stated that the agency exceeded its statutory authority by enacting such a broad definition. Consequently, the SEC’s withdrawal of the appeal cements this ruling as a legal precedent.

Kristin Smith, CEO of the Blockchain Association, hailed the development as a “complete and total victory.” She emphasized that the crypto industry can now move forward without fearing regulatory overreach.

Policy Shift Under New SEC Leadership

The SEC’s decision reflects broader regulatory changes following Gary Gensler’s departure as chair. President Donald Trump appointed Mark Uyeda as acting chair, while Paul Atkins awaits Senate confirmation as his successor.

Under Uyeda, the SEC has established a Crypto Task Force led by Commissioner Hester Peirce. The task force will create an official regulatory framework for digital assets. The agency has also put on ice or stopped several crypto-related cases brought under Gensler’s administration.

According to Fox Business reporter Eleanor Terrett, the SEC is prioritizing cases with imminent deadlines. Notably, lawsuits against Ripple and Kraken remain active, while Coinbase and Binance face deadlines in mid-March and April.