DeFi Leaders Urge SEC to Formalize Broker Guidance Into Rulemaking

DeFi Industry Pushes for SEC Rulemaking on Broker Classification

The DeFi Education Fund, alongside 35 other crypto industry leaders, has urged the Securities and Exchange Commission to formalize its recent decentralized finance interface guidance into formal rulemaking, according to a letter sent to the SEC this week.

The request follows an SEC statement released earlier this month that clarified certain user interface providers, such as DeFi wallets, do not need to register as broker-dealers.

Letter Requests Principles-Based Framework

In the letter, the crypto groups pressed the agency to conduct rulemaking and adopt a formal regulatory approach. “Specifically, the Commission should consider adopting a principles-based framework that provides clear, objective criteria for when activity falls within the definition of ‘broker,’ iterating on the criteria in the Statement,” the groups stated. “Finalizing these principles would provide the legal certainty needed to support responsible innovation while preserving the Commission’s ability to regulate the intermediaries that pose the risks that the broker-dealer regulatory regime was designed to address.”

Organizations Signing the Letter

Other advocacy groups that signed the letter include the Crypto Council for Innovation, the Blockchain Association, and the Solana Policy Institute. Aave Labs, Andreessen Horowitz, Uniswap Labs, and Mysten Labs, Inc. also signed on.

SEC’s April 13 Statement on Broker-Dealer Classification

On April 13, the SEC’s Division of Trading and Markets released a staff statement delineating that interfaces, such as DeFi wallets, would generally not be considered a broker-dealer. The SEC described the guidance as an “interim step while the Commission continues to consider various regulatory issues.”

The SEC outlined specific scenarios where an interface could be classified as a broker-dealer, including if it solicits investors, makes investment recommendations, or sways routing order decisions.

Industry Concerns About Informal Guidance

While the DeFi Education Fund and other groups called the SEC’s statement “an important step,” they warned that the guidance may not have lasting power. “As the digital asset industry knows too well, reliance on informal guidance has its own risks,” they said in the letter. “It is critically important that the Commission prevent an overly expansive interpretation of the term ‘broker’ from existing now or being revived in five years.”