The Securities and Exchange Commission ended its court challenge to block SEC policies extending to DeFi users and projects. This decision favors the digital asset sector.

On Wednesday the SEC sent its motion to dismiss the Fifth Circuit Court of Appeals voluntarily in a four-page document. Under this ruling the Texas federal judge’s November decision stands since the SEC must drop its appeal to expand the authority of the DeFi trader definition. Blockchain Association CEO Kristin Smith said in a Feb. 19 X post:

“Complete and total victory today in our case against the SEC over the dealer rule. The crypto industry can breathe a sigh of relief.”

Legal Battle Against SEC’s Dealer Rule Expansion

The Blockchain Association and Crypto Freedom Alliance of Texas initiated legal action under the APA to challenge how the SEC expanded its dealer rule in their original lawsuit.

Judge O’Connor granted the Blockchain Association and Crypto Freedom Alliance of Texas their request for removal of crypto-related changes to the agency rules without needing to hold a trial. 

The new rules wanted DeFi protocols to sign up as proper securities platforms yet people strongly opposed it. Under the Blockchain Association leadership Kristin Smith celebrated the SEC dismissal as a crucial breakthrough for digital assets.

Smith explained that the association started its legal action to stop the SEC from extending its authority over crypto-based operations. The new management team at the SEC creates a positive chance for better interactions between our industry and the SEC moving ahead.

The SEC now signals its changing regulatory policy under new leadership after former Chair Gary Gensler left the agency. Acting SEC Chair Mark Uyeda has taken a different direction from his predecessor Gary Gensler by starting a group that wants to work with crypto-related businesses.

Peirce openly opposed the SEC’s dealer rule growth because she predicted it would make markets operate differently and lower their operational standards. The DeFi industry and its participants feared regulatory expansion would hurt their innovation potential.

Legal Proceedings Against Coinbase and Binance Stalled

The SEC changed its strategy that affects criminal investigations commissioners Gensler started. The legal trials against both Coinbase and Binance have taken longer than expected before moving forward.

After a federal judge in Washington ordered both parties to stop proceedings for 60 days the SEC and Binance can review updated regulations for their case. A New York federal judge in January allowed Coinbase to ask for a legal review of its struggle against the SEC while waiting for top court decision guidance about crypto securities.

Market analysts think this new stage of regulation will create better discussions between the SEC and digital asset professionals. The end of this appeal favors industry outreach over heavy monitoring in upcoming government decisions.

The SEC’s decision to drop its appeal in a crypto regulation case could be considered a turning point in terms of a new approach to regulation, rather than enforcement.

Regulatory guidelines will move forward supported by new company decision-makers and updated court cases within the industry. The final verdict will determine what type of regulations DeFi and digital assets will face for the future.