The U.S. Securities and Exchange Commission (SEC) has withdrawn its appeal against a court ruling that struck down its broker-dealer rule, signaling a potential shift in its approach to cryptocurrency regulation. This decision follows industry backlash and a legal challenge that questioned the agency’s authority to impose stricter oversight on decentralized platforms.
In early 2024, the SEC introduced a rule that sought to classify decentralized finance (DeFi) platforms and crypto firms with over $50 million in capital as brokers and dealers. Under this regulation, these entities would have been required to comply with rigorous registration and reporting requirements similar to those imposed on traditional financial institutions. The crypto industry immediately pushed back, arguing that the rule was unrealistic and would place an excessive burden on decentralized platforms that lack a central governing entity.
Several industry advocacy groups, including the Blockchain Association and the Crypto Freedom Alliance of Texas, challenged the SEC’s rule in court. They argued that the agency was overstepping its authority and attempting to impose regulations that did not align with existing securities laws. The legal battle culminated in a significant victory for the crypto industry in November 2024 when U.S. District Judge Reed O’Connor ruled that the SEC’s regulatory move was beyond its statutory limits. The judge stated that the rule was “untethered” from securities law and could potentially harm the DeFi sector by imposing compliance standards designed for traditional financial institutions.
Following the court ruling, the SEC initially signaled its intent to appeal, but in February 2025, the agency officially withdrew its challenge. This decision was met with approval across the crypto industry, with many seeing it as a sign that the SEC may be reconsidering its aggressive stance toward digital assets.
SEC Commissioner Hester Peirce, a known advocate for fairer crypto regulations, had previously criticized the rule, calling it an “unlawful power grab.” Many industry leaders echoed her concerns, warning that the SEC’s enforcement-heavy approach could stifle innovation and drive crypto businesses out of the United States.
The SEC’s decision to withdraw its appeal also comes at a time of leadership change. Under former Chairman Gary Gensler, the agency aggressively pursued regulatory actions against major crypto firms, often taking a strict enforcement-based approach. However, with Mark Uyeda now leading the SEC, there are indications that the agency may adopt a more measured stance. Uyeda’s leadership is expected to focus on ensuring regulatory clarity while balancing innovation and investor protection.
This development aligns with broader efforts in the U.S. to establish a more structured approach to crypto regulation. In January 2025, former President Donald Trump signed an executive order aimed at creating a comprehensive framework for digital asset oversight. The move signaled a shift toward clearer regulatory guidelines rather than ad hoc enforcement actions.
Further supporting this shift, the SEC recently acknowledged Bitwise’s application for a spot XRP exchange-traded fund (ETF), a move that could open the door for more institutional adoption of digital assets. If approved, this ETF would provide investors with a regulated way to gain exposure to XRP, potentially bridging the gap between traditional finance and the crypto market.
Although the SEC’s withdrawal of its appeal is a win for the crypto industry, it does not mean that regulatory oversight is disappearing. Instead, it suggests that regulators may be moving toward a more collaborative approach, working with industry stakeholders to develop policies that foster innovation while maintaining market integrity. This could mark the beginning of a new phase for crypto regulation in the U.S., one that prioritizes balanced policies over aggressive enforcement.
