Blockchain Association Challenges SEC Over Potential Citadel DeFi Exemptions

The Blockchain Association has formally petitioned the Securities and Exchange Commission (SEC) to address an alleged double standard regarding its regulatory stance on decentralized finance (DeFi). The industry group is seeking clarity on whether the agency intends to grant exemptions to traditional market makers, such as Citadel Securities, while simultaneously pursuing enforcement actions against native crypto protocols.

In a letter addressed to SEC Chair Gary Gensler, the organization highlighted concerns that the Commission’s recent regulatory approach could create an uneven playing field. The Association pointed to the SEC’s definition of 'exchanges' and how those rules are applied to decentralized platforms versus established Wall Street firms. The group argues that if the SEC intends to regulate DeFi platforms as securities exchanges, it must apply the same stringent requirements to traditional financial companies that engage in similar market-making activities.

"The SEC’s current trajectory suggests a bifurcated regulatory environment where incumbents may be treated differently than digital asset innovators," the Association stated. The letter emphasizes that the crypto industry requires regulatory certainty to operate, rather than the ongoing 'regulation by enforcement' model that has defined the SEC's recent tenure.

This move follows a series of high-profile lawsuits brought by the SEC against major crypto exchanges and DeFi projects. The Blockchain Association is now demanding that the agency explicitly state whether traditional market makers would be subject to the same registration and compliance burdens currently being imposed on blockchain-based protocols. As of this writing, the SEC has not issued a formal response to the inquiry regarding its oversight of Citadel or other traditional financial entities in the context of DeFi operations.