Shocking revelation: SEC’s crusade to redefine ‘stock exchange’ impacts EVERY American & you won’t believe how it relates to cryptocurrencies!

The new “exchange” lawsuit is similar to the argument over which crypto entities should be considered.estate agents“, a saga that united much of the industry in opposition in the summer of 2021.

Specifically, the SEC’s most recent regulatory proposal aims to change that existing rules on alternative trading systemsor ATSsto broaden the definition of a securities “exchange” to include many participants in the digital asset industry who were not included. The new definition would include a group of people who provide “communications protocol systems” that allow people to express an interest in a potential trade in a security.

This begs the obvious question of what a “communications protocol system” even is. But the proposed rule never defines the ambiguous term, instead arguing that a “group of persons” can exist whenever people “act together” – even by an “informal” agreement – even if none of them individually or as a group Exercising any “control” over the functions or facilities of an exchange. This comically broad interpretation means that even an independent body of people not actually involved in the core functions of an exchange could be subject to securities regulation for the operation of an “exchange”.

This distorted definition of “exchange” would fundamentally change the traditional understanding of how we think of an exchange. It’s like expanding the definition of a “baseball team” from the group of people directly associated with it — the players, possibly the manager, coaches, and front-office staff — to a group that includes the team’s fans and even Includes third-party sports reporters that perform a specific “function”.[s]’ associated with the conduct of a game become part of the ‘team’. It’s doubtful anyone would consider a ticket seller in the parking lot part of the “team,” but according to the SEC’s new view, it is possible depending on “facts and circumstances.” One can easily imagine other examples of how this language might be stretched into the absurd. Does a utility that powers servers running a “communications protocol system” count as a partner in the exchange? Etc.

The SEC’s stock exchange initiative is the agency’s latest and most egregious attempt to expand its regulatory powers beyond those granted by Congress. For example, there is currently no law classifying digital assets as securities, and it therefore remains an open question as to whether the agency has the power to regulate digital assets. This proposed rulemaking conveniently sidesteps that issue and introduces a new interpretation of a “stock exchange” that gives the agency sweeping new latitude to regulate a wide range of industry participants, well beyond the statutory limits of the Stock Exchange Act. Indeed, Republicans on the House Financial Services Committee submitted their own letter to push The SEC withdrew the proposal due to concerns about exceeding regulation.

You can argue that electing SEC Chairman Gary Gensler is for the best on his word and give the Commission the benefit of the doubt that it is tracking this rulemaking “to reflect…changes…since Congress introduced the definition of an exchange.” However, given that the agency’s proposal comes after a string of enforcement actions and very little forward-looking guidance for the digital asset industry, Gensler doesn’t deserve it the benefit of the doubt.

While the SEC’s recent enforcement actions have received a lot of attention, it’s important that the agency’s crypto rule-making efforts — including its push to expand the agency’s powers — don’t go under the radar. Congress must closely monitor Gensler’s efforts and hold him accountable when they are not based on law and common sense.

By attempting to expand the SEC’s regulatory powers and open a new front in its ongoing war on crypto, Gensler is exposing the agency to increased scrutiny from Congress — the very opportunity for crypto advocates to make their strongest argument. The “exchange” definition may seem niche and technical, but the anti-tech impulse and regulatory encroachment behind the proposal should worry every American — regardless of what they think about crypto.

Amanda Tuminelli is the Chief Legal Officer of the Defi Education Fund, where he oversees the organization’s litigation and policy efforts. The opinions expressed in Fortune.com comments are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Wealth.