Crypto Exchanges Get a Break: SEC's New Rule Change and What It Means

The SEC recently made a move that might not directly involve Bitcoin or Ethereum but could significantly impact how crypto exchanges handle legal battles in the coming years.

Key Decision

• Date: October 31
• Action: Pushed back compliance deadlines for Regulation NMS
• New Deadline: 2026
• Reason: Court rejected request to pause deadlines due to government funding gap and need to keep markets running smoothly

Impact on Crypto Exchanges

This order is a big deal for crypto exchanges like Coinbase, Kraken, and Binance, which have been fighting enforcement actions while waiting for clear rules.

"How can you follow rules that haven't been clearly defined yet?"

Legal Arguments

• Kraken, Bittrex, and Binance argue that the SEC hasn't provided clear guidance on how to comply with securities laws in the crypto world.
• Claim: Suing them for not following rules that aren't clearly explained violates their rights to due process.
• Judges' Response: Started to side with this argument, noting that the SEC can't expect platforms to follow rules that haven't been properly laid out.

Precedent Set

The SEC's recent order on Regulation NMS shows that even in traditional markets, compliance can be tricky when rules are still being figured out.

• Implication: Gives crypto exchanges a stronger case in court, arguing that they can't be held accountable for not following rules that don't exist yet.
• Key Point: The order doesn't mention crypto, but it sets a clear precedent: when rules are unclear and resources are limited, giving platforms more time to comply makes sense.

Timeline and Future Implications

• Relief Provided: Until 2026 for certain rules.
• Focus: Crypto cases will continue to focus on fair notice and due process.
• Potential Outcome: If the SEC eventually finalizes rules for the crypto market, similar exemptive orders might be issued to give platforms time to adjust.
• Current Strategy: Crypto lawyers have a new strategy to use in court, mirroring the approach the SEC took for traditional exchanges.