Since
1946,
in
the
wake
of
the
New
Deal,
federal
government
agencies
have
had
to
abide
by
the
constitutional
safeguards
and
processes
set
forth
in
the
Administrative
Procedure
Act
(APA).
The
APA
is
specifically
designed
to
allow
for
public
participation,
transparency,
and
accountability
in
the
agency
rulemaking
process,
and
provides
the
public
with
a
right
to
challenge
in
court
an
agency
action
that
fails
to
follow
the
APA’s
requirements.
Simply
put,
the
APA
ensures
that
federal
agencies
provide
notice
and
meaningful
opportunities
for
engagement
so
the
American
people
have
a
say
in
the
agency-made
rules
that
impact
and
govern
many
aspects
of
our
lives
and
our
economy
–
from
food
safety
labeling
to
rules
controlling
how
we
pay
taxes.
For
the
past
two
years,
the
Securities
and
Exchange
Commission
(SEC)
has
been
working
to
finalize
a
rule
that
expands
the
definition
of
“dealer”
under
U.S.
securities
laws.
Unfortunately,
the
agency
finalized
the
rule
while
ignoring
the
APA,
depriving
the
public
of
well-reasoned
decision
making
and
a
clear
explanation
of
how
the
rule
applies
to
them.
Unsurprisingly,
two
lawsuits
have
already
been
filed
that
challenge
the
rule’s
finalization
and
ask
a
court
to
vacate
the
rule.
For
nearly
100
years,
market
participants
have
benefited
greatly
from
a
firm
understanding
of
whether
they’re
legally
required
to
register
as
a
dealer
or
not,
hinging
on
the
services
provided
by
a
dealer
to
their
customer.
However,
the
SEC’s
newly
expanded
definition
of
“dealer”
now
includes
any
person
whose
trading
activity
regularly
has
the
effect
of
providing
liquidity,
even
if
this
person
has
no
customers
at
all.
Under
this
new
definition,
even
with
no
intermediary
and
no
customer
relationship,
people
who
trade
digital
assets
on
peer-to-peer
trading
platforms,
and
thus
provide
liquidity,
and
potentially
the
software
developers
of
such
platforms,
would
need
to
abide
by
SEC
dealer
registration
requirements
or
could
face
severe
SEC
enforcement
action.
The
new
standard
is
overly
broad
and
ignores
long-standing
legal
precedent
focused
on
dealer
service
to
customers,
and
undoubtedly
will
inject
instability
and
risk
into
the
market.
The
change
also
blatantly
violates
the
APA
on
multiple
fronts.
Most
egregiously,
even
as
Commissioner
Hester
Peirce,
the
SEC
commissioner
known
to
be
most
favorable
to
digital
assets,
noted
the
SEC’s
economic
analysis
on
the
rule’s
impact
on
digital
asset
market
participants
found
the
consequences
of
the
rule
are
too
“difficult
to
predict,”
despite
receiving
dozens
of
robust
comments
warning
of
what
those
consequences
will
be.
That’s
why
Blockchain
Association
joined
the
Crypto
Freedom
Alliance
of
Texas
in
filing
one
of
the
suits
against
the
SEC.
The
APA
has
to
mean
something.
Those
who
run
the
administrative
agencies
of
our
federal
government,
like
the
SEC,
are
appointed
–
not
directly
elected
by
the
people.
There
ought
to
be
ways
to
hold
them
accountable
and
ensure
American
voices
are
factored
into
agency
decision
making.
As
we
argue
in
our
lawsuit,
the
SEC,
in
finalizing
the
Dealer
Rule,
violated
the
APA
by
changing
the
definition
in
a
manner
that
extends
beyond
its
Congressional
authority
–
far
exceeding
how
the
term
“dealer”
has
been
interpreted
for
decades
by
policymakers
and
the
courts.
Federal
agencies
must
legally
explain
their
actions
when
they
depart
from
a
previously
held
position.
In
expanding
the
scope
of
the
Dealer
Rule,
the
SEC
asserts
it
didn’t
change
its
position
at
all.
But
the
SEC’s
new
interpretation
of
dealer,
which
looks
at
the
after-the-fact
effects
of
trading
activity,
is
clearly
a
departure
from
its
prior
interpretation
of
dealer,
which
looked
at
whether
a
person
was
offering
services
to
customers.
This
is
what
has
guided
market
participants
for
the
better
part
of
the
last
century.
To
suggest
otherwise
is
disingenuous
and
dishonest,
at
best.
The
SEC
also
failed
to
respond
to
comments
or
engage
in
reasoned
decision-making,
as
required
by
the
APA.
Between
proposing
this
rule
change
more
than
two
years
ago
and
finalizing
it
just
a
few
months
ago,
the
SEC
had
plenty
of
opportunity
to
listen
to
and
engage
with
the
digital
asset
industry,
which
submitted
to
the
agency
dozens
of
robust
and
thoughtful
comments
that
detailed
the
impact
of
the
rule
on
the
digital
asset
ecosystem.
For
instance,
the
rule
will
increase
market
instability,
decrease
access
to
the
market,
and
will
push
entrepreneurs,
businesses,
and
jobs
overseas
to
less
regulated
–
and
less
safe
–
jurisdictions.
Yet,
the
SEC
barely
acknowledged
this
feedback,
as
required
by
the
APA,
and
instead,
finalized
the
rule
with
no
analysis
as
to
the
effect
on
digital
asset
markets,
no
clarity
as
to
which
digital
asset
market
participants
are
implicated,
and
no
explanation
as
to
how
participants
can
comply.
Commissioner
Peirce,
,
further
highlighted
the
SEC’s
refusal
to
address
the
Dealer
Rule’s
application
to
decentralized
finance
innovations,
despite
commenters’
repeated
concerns
and
questions
about
new
qualitative
tests
for
determining
who
would
be
considered
a
dealer
under
the
new
rule.
Ultimately,
the
SEC’s
refusal
to
even
simply
respond
to
comments
about
the
reach
and
implications
of
the
new
Dealer
Rule
has
left
the
digital
asset
industry
in
the
dark
and
concerned
for
its
future.
No
business
or
industry
should
be
forced
to
operate
in
constant
fear
of
post
hoc
second-guessing
and
“gotcha”
enforcement
tactics,
especially
for
potential
violations
of
new
rules
developed
outside
the
bounds
of
the
law.
For
decades,
our
country
has
been
the
global
leader
in
innovation,
but
the
new
Dealer
Rule
undermines
our
competitive
edge
and
standing
in
the
global
marketplace
by
forcing
developers
and
entrepreneurs
off-shore.
What
could
be
more
un-American
than
knowingly
stifling
our
own
spirit
of
innovation?
Late
last
week,
in
overturning
the
Chevron
doctrine,
we
saw
the
Supreme
Court
take
a
major
step
toward
reigning
in
unfettered
regulatory
interpretations
that
hurt
American
businesses
and
consumers
alike.
We’re
hopeful
the
courts
don’t
stop
there
and
will
continue
to
strike
down
government
overreach.
Given
the
grave
ramifications
of
keeping
the
Dealer
Rule
in
place
when
the
APA
was
so
clearly
violated,
the
courts
must
intervene
to
overturn
this
harmful
rule
and
ensure
it
does
not
go
into
effect.
Note:
The
views
expressed
in
this
column
are
those
of
the
author
and
do
not
necessarily
reflect
those
of
CoinDesk,
Inc.
or
its
owners
and
affiliates.
