SEC Drops Crypto Legal Battle, Signaling Shift Towards Collaboration

The U.S. Securities and Exchange Commission (SEC) has abandoned its legal battle with the crypto industry over a controversial rule that would have expanded the definition of regulated securities dealers to include a wide array of digital asset operations. The agency has formally dropped its appeal in a case where the Blockchain Association and Crypto Freedom Alliance of Texas sued the SEC, and a Texas federal judge agreed that the regulator had exceeded its statutory authority.

The SEC's retreat from this legal fight is part of a broader shift in its approach to the crypto industry. Under the leadership of President Donald Trump, the agency has been reversing years of its adversarial stance towards crypto issues. The latest move is a sign of this new approach, which aims to foster productive conversations between the industry and the regulator.

The rewritten dealer rule was one of the SEC's major efforts at crypto rulemaking under the tenure of former chairman Gary Gensler. The industry's position was that the rule made untenable demands on decentralized finance (DeFi) and also roped in crypto traders who didn't offer dealer services. The SEC did not immediately respond to a request for comment on the legal withdrawal.

Since being installed as the SEC's acting chairman, Mark Uyeda has begun to aggressively overhaul the agency's senior staff and its legal approach to the crypto sector. He is set to be replaced by Trump's permanent pick, Paul Atkins, who is expected to continue in the same path.

Earlier this month, the SEC also sought to pause its enforcement fight with Binance over the agency's accusations of securities violations so the matter could be resolved in another way. This move is another indication of the SEC's shifting approach to the crypto industry, which appears to be more focused on collaboration and dialogue than on aggressive enforcement actions.