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:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
  • Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
Tags

Upcoming Events

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.

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.

recent research

Research Report Templates.jpg

Research

Bluefin possibly stands at an inflection point. The token is near an all-time low yet the protocol’s spot volume market share and derivatives exchange usage have been increasing month over month since its November launch. Given its current market position and the upcoming upgrades (for both Bluefin and SUI), there may be upside potential before the increased supply growth in December. However, strong opposition from existing competitors (like Cetus and Suilend), as well as new entrants (like Aftermath), pose key challenges to Bluefin’s medium-term success.

article-image

Top Committee Democrat Sen. Elizabeth Warren in her opening statement accused Atkins of “helping billionaire CEOs like Sam Bankman-Fried”

article-image

Introducing garbled circuits for enhanced privacy and regulatory compliance

article-image

Ross Ulbricht was a freedom maximalist building freedom tech, powered by Bitcoin

article-image

Solana validators can reap benefits including payments, votes and community clout

article-image

Sponsored

WalletConnect is cementing itself as the essential connectivity layer, ensuring wallets remain the entry point for billions of users

article-image

According to a legal filing, Galaxy Digital helped boost the price of LUNA while quietly selling its tokens