Crypto Groups Urge SEC to Set Clear Rules for DeFi Broker Definitions

More than 30 crypto and DeFi-focused organizations are urging the U.S. Securities and Exchange Commission (SEC) to stop relying on informal interpretations and instead adopt formal, durable rules that clearly distinguish non-custodial software and blockchain infrastructure participants from traditional ‘brokers’—a move the industry says is critical to reducing regulatory uncertainty and keeping innovation onshore.

The push, highlighted in a research note from MEXC Ventures, centers on a joint letter submitted to the SEC on April 21 (Monday ET). The coalition—organized around the DeFi Education Fund—asked the agency to establish a principles-based framework that provides objective criteria for when an activity falls under the SEC’s ‘broker’ definition, rather than leaving market participants to navigate staff-level guidance that may shift with enforcement priorities or political transitions.

At stake is a long-running dispute over who counts as a market intermediary in decentralized finance. Industry participants argue that if validators, data service providers, communications network operators, and other infrastructure actors are swept into the ‘broker’ category, the result could be a chilling effect on protocol development and U.S.-based deployment. DeFi systems are designed to minimize centralized control; applying legacy brokerage concepts too broadly, the group argues, risks forcing software and infrastructure providers into compliance models built for intermediated finance.

MEXC Ventures said recent signals from the SEC suggesting a willingness to differentiate certain non-custodial crypto trading interfaces from intermediaries are a constructive step. Still, the firm warned that guidance issued at the staff level does not provide the legal stability needed for long-term planning. “The format of regulation matters,” the report concluded, framing formal rulemaking as more resilient than case-by-case interpretation—especially in an environment where U.S. policy posture toward digital assets can change quickly.

The coalition’s letter emphasizes that ambiguity radiates through nearly every layer of a DeFi project’s lifecycle, from initial design choices to token distribution mechanics, user access controls, and whether a protocol can safely serve U.S. users at all. For global teams, unclear broker obligations can also translate into delayed launches, restricted features, or decisions to avoid the U.S. market entirely—outcomes that critics say may undermine both innovation and transparent consumer protections.

Notably, concerns about overbroad classification have also been aired inside the SEC. Commissioner Hester Peirce has publicly questioned whether existing definitions are fit for decentralized technologies, warning that the agency’s current framework could mistakenly categorize software providers and infrastructure participants as regulated intermediaries. For the industry, such remarks are seen as a signal that internal debate is evolving beyond mere interpretation and toward the need for a sustainable regulatory structure that reflects how crypto markets actually function.

Market participants argue that treating non-custodial tools like brokers does not necessarily improve investor protection, and could instead push activity into less transparent channels or offshore jurisdictions. In their view, clearer lines would encourage compliance and responsible innovation by letting builders understand, in advance, which activities trigger registration and reporting duties—and which do not.

The debate also carries international implications. With the European Union implementing its Markets in Crypto-Assets regulation (MiCA), jurisdictions are increasingly trying to define how DeFi fits alongside traditional financial oversight. If the SEC were to codify a clear approach to non-custodial tools and infrastructure roles through formal rulemaking, it could become a reference point for cross-border ‘regulatory alignment’—and a key input for global firms building U.S. market entry and compliance strategies.

Even proponents acknowledge the timeline may be slow. Formal SEC rulemaking typically involves drafting, public notice, comment periods, hearings, and legal review. In the near term, the agency could issue additional statements or refined guidance, while a broader effort to revisit the broker definition could unfold over the medium to long term. Still, the industry’s bet is that once rules are codified, the market will face fewer abrupt shifts driven by changing interpretations.

Ultimately, the joint letter underscores a growing consensus among DeFi stakeholders: without a stable, rules-based framework that separates technical participation from brokerage activity, the U.S. risks weakening its position in the next phase of blockchain innovation. How the SEC responds—whether through incremental guidance or a full rulemaking process—could shape not only the trajectory of DeFi development in the U.S., but also the global regulatory map for decentralized finance.