The Washington, DC-based non-profit believes the SEC is going too far with its new proposed definition of Exchange, which includes the means of communication as well as trade.
The Securities and Exchange Commission’s (SEC) proposed redefinition of an “Exchange” has been dubbed an “unconstitutional overreach” by the non-profit blockchain advocacy group Coin Center.
The comments were made in a written response to the Securities and Exchange Commission’s March 18 Amendments Regarding the Definition of “Exchange,” which details changing the definition of “Exchange” from a “system that brings together the orders” of a security to one that “brings together buyers and sellers.”
According to the rule change, Communication Protocol Systems are also exchanges that may bring in programmers who simply share code for a crypto trade. If the proposal is adopted as an SEC rule, decentralised exchanges (DEX) like UniSwap (UNI) and PancakeSwap (CAKE) will be notified that the commission wants them to register as exchanges.
According to Coin Center, this shift “to a speech-based definition” would have an impact on countless developers, publishers, and republishers who trade code but not tokens. This is especially true for DEX developers.
In lengthy comments filed on April 14, the nonprofit called the proposed change unconstitutional and cited Supreme Court (SC) precedent that it believes could compel the SEC to withdraw its proposal:
“The way it [expands the definition of ‘Exchange’] would create an inappropriately broad standard for registration that would impose an unconstitutional prior restraint on the protected speech activities of countless software developers and technologists.”
According to the SEC, incorporating considerations of Communication Protocol Systems into the definition of “Exchange” recognises the benefit that individual buyers and sellers derive from communicating within a marketplace. According to the company, including those users in the definition can “reduce regulatory disparities among like markets “.
In Lowe v SEC, Coin Center stated that the commission “threatened the speech rights of Americans with an overbroad interpretation of its statutory authority.”
The SEC will accept comments on the rule proposal from US citizens until April 18.
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