In a major shift in trends over the last four years, the US Securities and Exchange Commission dismissed the appeal of the infamous “dealer rule,” cementing a complete victory for the Blockchain Association (BA), the Crypto Freedom Alliance of Texas (CFAT), and the crypto industry at large.
The dealer rule, proposed by the SEC in February 2024, sought to require companies that routinely trade US securities to register as dealers.
At the time, former SEC Chairman Gary Gensler said in a statement that firms “have been acting as de facto market makers, and despite their regularity of participation consistent with buying and selling securities or government securities ‘as a part of a regular business,’ a number of these firms have not registered with the Commission as dealers.” He added that this leaves both investors and markets unprotected.
SEC drops appeal against Blockchain Association and CFAT
In February 2024, the SEC proposed to expand the definition of “dealer” to include companies trading US securities and other securities, which will include crypto companies.
The crypto and blockchain industry opposed this, arguing that the SEC is overstretching its regulatory authority. On April 3, 2024, BA and CFAT pioneered a lawsuit against the SEC, asserting that the dealer rule constituted an unlawful overextension of the agency’s authority, adding that it would be harmful to innovation in the digital assets market.
In November 2024, the US District Court for the Northern District of Texas ruled in favor of the plaintiffs, stating that the SEC stepped out of its legal authority. The SEC filed an appeal to this ruling in January 2025. However, the agency has now withdrawn its appeal as of February 19, 2025.
Blockchain Association CEO, Kristin Smith said the SEC’s decision to withdraw the appeal is a step in the right direction for the agency’s view of the crypto industry. “A new day at the SEC, after former Chair Gensler’s crusade against crypto – the agency’s voluntary dismissal today is welcome news,” Smith said.
Marisa Coppel, Head of Legal at the Blockchain Association, emphasized that the ruling was a means to counter regulatory overreach.
The general outlook
US regulators have always had a strained relationship with the digital assets market, stifling its growth with consecutive lawsuits, especially over the last four years, which coincided with Joe Biden’s term as president and Gary Gensler’s tenure as SEC chair.
The SEC’s withdrawal from the dealer rule litigation does not stand alone; it is the latest in a string of losses the agency has sustained in its regulatory assault against the cryptocurrency industry. In 2023, a federal judge ruled that Ripple Labs did not break the securities laws by selling its XRP token on public exchanges, thereby setting a landmark decision that weakened the SEC’s ability to tag cryptocurrencies as securities.
Under former Chair Gary Gensler, the commission launched an unprecedented series of lawsuits against major digital asset exchanges such as Coinbase, Binance, and Kraken, citing their responsibilities in trading unregistered securities. The SEC was in search of a ruling to back its broader argument that many digital assets should also be considered securities.
With new leadership at the SEC and the leadership of the pro-crypto President Trump, there is optimism within the cryptocurrency community that future regulatory endeavors will be characterized by constructive dialogue and a balanced understanding of the digital assets space.
Stakeholders in the crypto industry celebrated the withdrawal of the dealer rule lawsuit, and it will be good news for companies like Ripple Labs, who have long been caught in the SEC’s litigation web.
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