House Republicans push back on SEC proposal to alter exchange definition

House Financial Services Committee Republicans call the SEC’s suggested “exchange” definition an overstep

share

House Financial Services Committee Republicans has asked the SEC to rescind its proposed rule to change the definition of “exchange.” 

In a letter sent to the securities regulator Tuesday ahead of the committee’s crypto-focused hearing, Republicans argued the proposed rule exceeds “statutory authority” granted to the SEC. 

“The Proposed Rule will stifle innovation and harm digital asset market participants and the U.S. economy more broadly,” committee Republicans said in the letter.

In January 2022, the SEC proposed an amendment that would include “Communication Protocol Systems” within the agency’s definition of an exchange, meaning these entities would have to register as such. In response to public feedback, the SEC reopened the comment period for the proposal in May 2022, and again reopened the window in April 2023. 

“The reopening release reiterated the applicability of existing rules to platforms that trade crypto asset securities, including so-called ‘DeFi’ systems, and provides supplemental information and economic analysis for systems that would be included in the new, proposed exchange definition,” the SEC said in April when it reopened the comment period for the second time. 

Crypto industry members and advocates have expressed concern with the proposed definition change, arguing that the rule goes beyond the SEC’s powers, as defined in the Administrative Procedure Act (APA).

“We write to request that the Commission withdraw its proposed redefinition of ‘exchange’ and begin its consideration of how to adapt its regulations in the DeFi context anew — after rigorous economic analysis, genuine, broad engagement with the industry, and a close look at the limits of its statutory jurisdiction,” crypto investment firm Paradigm wrote to the SEC earlier this month.

The Blockchain Association, a lobbying group dedicated to advancing crypto-friendly policy, also released a statement Tuesday, arguing that the SEC is going beyond its jurisdictional powers by attempting to expand the definition so broadly. 

House Republicans expressed similar concerns in their comment Tuesday. 

“In the supplemental information provided by the Commission, the SEC estimates that ‘an additional 15-20’ systems trading digital assets would be designated as an exchange,” the letter stated. “However, given the breadth of the new definition, the Proposed Rule would have a much broader impact than what is accounted for in the proposal.” 

The deadline to submit comments for this newly reopened period is Tuesday, June 13, according to the SEC’s filing on the Federal Register.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

REPORT_Template.png

Research

The Sonic blockchain is leveraging redesigned airdrop incentives and its FeeM program to propel DeFi activity and attract institutional capital, setting the stage for ecosystem growth. Within this environment, leading protocols Shadow Exchange and Silo are poised to asymmetrically benefit due to innovative features and favorable valuations, despite facing ecosystem dependency and competitive pressures. This positions them as compelling, potentially shorter-term, investment opportunities contingent on Sonic's sustained success.

article-image

Sponsored

WalletConnect is the default for secure, scalable onchain interaction — but this isn’t a peak, it’s the launchpad

article-image

Circle’s stock is expected to price at $31 and will go public on the NYSE Thursday

article-image

Solana’s most prolific token-launch tool might be prepping a token of its own

article-image

The tentative agreement China and the US penned last month appears to be in a precarious position

article-image

Fineqia’s Matteo Greco says Circle’s targeting a valuation in line with market expectations to avoid a post-launch drop like Coinbase

article-image

The President’s son reportedly said his family may pursue legal action