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Texas court rules SEC's expanded definition of "dealer" is illegal, impacting the crypto finance sector

ChainCatcher news, a Texas court has ordered the U.S. Securities and Exchange Commission to repeal a controversial rule that broadly redefined the term "Dealer," a move that has impacted both cryptocurrency-focused financial firms and traditional financial companies.Judge Reed O'Connor found that the rule was passed in February by a 3 to 2 vote, exceeding the statutory authority of the SEC. Traditionally, a dealer refers to an entity that buys and sells securities for itself rather than for others. The SEC expanded the definition in an attempt to include any entity capable of providing market liquidity, particularly in the U.S. Treasury market.In a footnote of the original proposal draft, it was explicitly stated that those "engaged in the trading of crypto securities" must comply with securities laws, register with the SEC, and join industry-supported self-regulatory organizations. Initially, participants in the crypto industry objected to the rule. The expanded interpretation effectively eliminated the distinction between "trader" and "dealer" in traditional understanding.The Texas Blockchain Association and the Crypto Freedom Alliance filed a lawsuit against the securities regulator in April (the month the rule officially took effect), claiming that the rule's intervention in the crypto space was excessive and conflicted with existing laws regulating securities dealers, which have been in place for 90 years.
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