SEC Drops DeFi Appeal: A New Era for Crypto Regulation
1min read The Securities and Exchange Commission (SEC) has voluntarily dismissed its appeal in a case that would have required decentralized finance (DeFi) protocols to register as securities dealers. The agency filed a four-page motion in the U.S. Court of Appeals for the Fifth Circuit to dismiss the appeal, a move that went unopposed by other parties.
The case began a year ago when the SEC attempted to expand its definition of “dealer” to include DeFi protocols. Under these changes, DeFi projects would have needed to register with the SEC as securities exchanges and brokers or face potential legal action.
In November, a federal judge in Texas ruled against the SEC’s expanded definition. U.S. District Judge Reed O’Connor found that the regulator had overstepped its authority by trying to treat DeFi traders as traditional financial brokers.
The lawsuit that led to this ruling came from two organizations: the Blockchain Association and the Crypto Freedom Alliance of Texas. They challenged the SEC’s modified rules, arguing that including DeFi in these regulations violated the Administrative Procedures Act (APA).
Judge O’Connor agreed with their arguments so strongly that she ordered the SEC to remove the crypto-related changes without requiring a trial. This decision protected DeFi projects from falling under regulations designed for traditional financial brokers.
The withdrawal comes as part of broader changes at the SEC under new leadership. Following Gary Gensler’s departure, Acting SEC Chair Mark Uyeda has started taking a different approach to crypto regulation.
One of Uyeda’s first moves was creating a crypto-focused task force. He appointed Commissioner Hester Peirce to lead this group. Peirce, who earned the nickname “Crypto Mom,” has consistently supported clear guidelines for digital assets.
The task force aims to develop better rules for the crypto industry. This represents a shift from the previous approach, which many crypto companies viewed as too strict.
Kristin Smith, CEO of the Blockchain Association, praised the SEC’s decision. “We first brought our lawsuit against the SEC to challenge the agency’s unlawful power grab,” she said. “With new leadership at the agency leading to today’s final dismissal, we’re looking forward to productive conversations between industry and the SEC moving forward.”
The SEC’s enforcement actions against major crypto exchanges have also slowed. Cases filed in 2023 against Binance and Coinbase 
