Blockchain Association Objects to Proposal for Regulating Tokenized Markets

The Blockchain Association countered arguments that the SEC should regulate participants supporting tokenized markets as if they were traditional financial intermediaries.  

In a letter to the SEC, the Blockchain Association responded to the argument that anyone involved in building or operating software that touches securities transactions—including wallet providers, validators, liquidity providers, and protocol developers—should be subject to full securities intermediary registration. The Association asserted that this position fundamentally misunderstands how the law works, conflating the infrastructure through which transactions travel with the intermediaries who actually conduct them.

The Association argued that DeFi participants generally do not meet the legal definitions of exchanges, brokers, or dealers and that courts have consistently drawn a distinction between passive, non-custodial technology and active intermediation. The Association cited a key case involving Coinbase's non-custodial wallet, where a court found that software enabling self-directed trading—without custody of assets, investment recommendations, or discretionary routing—does not constitute brokerage. The Association said that extending the proposed regulation to include all intermediaries would absurdly require companies like Nasdaq's technology division, Equinix, Bloomberg, and Broadridge to register as exchanges or brokers, since they all build and operate systems that facilitate securities trading.

The Association also rejected demands that the SEC pursue full notice-and-comment rulemaking before allowing tokenized equity trading to proceed. It argued that the agency routinely used no-action letters, interpretive guidance, and targeted exemptions to accommodate market innovation first, only later formalizing rules once practices are better understood. Requiring a completed rulemaking upfront, it argued, would delay innovation by years and cede ground to more permissive jurisdictions abroad.

In addition, the Association argued that the SEC must not apply the same rigorous cost-benefit standards to exemptive relief that courts require for formal rulemaking. The Association asserted that the statutory text and the relevant case law applies a more deferential standard to deregulatory exemptions than to new rules. The Association pointed out that the Trump Administration's deregulatory Executive Orders explicitly call for faster, less burdensome review of deregulatory actions. The Association urged the SEC to proceed with the innovation exemption framework supported by Chair Atkins, consistent with the agency's long institutional tradition of enabling financial technology to develop under monitored, conditional relief.