30+ Crypto Groups Urge SEC to Define DeFi Brokers and Protect Infrastructure

More than 30 crypto and DeFi groups are pressing the SEC to draw a hard line between real brokers and the software, validators, and network infrastructure that keep decentralized finance running.

• 30+ groups signed a joint letter to the SEC on April 21
• Main ask: formal, durable DeFi broker definitions
• Big concern: infrastructure providers getting treated like financial middlemen
• Why it matters: vague rules could stall U.S. crypto development and push builders offshore

The coalition, organized through the DeFi Education Fund, wants the U.S. Securities and Exchange Commission to stop leaning on informal staff guidance and instead adopt a principles-based framework that clearly separates non-custodial software and blockchain infrastructure from traditional brokerage activity. In plain English: the industry wants the SEC to regulate actual financial intermediaries, not accidentally treat code, network tools, and user interfaces like Wall Street brokers in a suit and tie.

That distinction is the whole fight. In traditional finance, a broker is an intermediary that typically handles customer relationships, often has custody or control, and sits in the middle of a transaction. DeFi works differently. A lot of the machinery is software, not a human firm with a customer desk and a phone line. If regulators flatten those differences, they risk dragging validators, data service providers, communications network operators, and interface developers into rules that were built for a completely different market structure.

MEXC Ventures highlighted the issue in a research note, saying recent SEC signals may suggest some non-custodial interfaces could be treated differently. But that still doesn’t solve the core problem. Staff-level guidance is just that: informal interpretation from agency staff, not a formal rule with long-term legal force. It can shift, wobble, or vanish whenever the political winds change. That is not a foundation for anyone trying to build serious infrastructure.

The coalition’s letter puts it bluntly, asking the SEC to “stop relying on informal interpretations and instead adopt formal, durable rules” that “clear[ly] distinguish non-custodial software and blockchain infrastructure participants from traditional ‘brokers’.”

That ask makes sense because the consequences of uncertainty are not theoretical. If builders cannot tell whether a protocol component, interface, or service might later be labeled brokerage activity, they start changing plans before launch. Teams may redesign token distribution, restrict user access, delay releases, cut features, or decide the U.S. market is too risky to touch. As the letter warns, “unclear broker obligations can also translate into delayed launches, restricted features, or decisions to avoid the U.S. market entirely.”

That’s the real damage of regulatory fog: it doesn’t just create legal headaches, it changes behavior. And usually not in a good way. When the rulebook is vague, the safest move is often to do less, launch later, or leave. That may keep lawyers busy, but it does absolutely nothing for innovation, consumer choice, or American competitiveness.

There is, of course, a reason the SEC is cautious. The agency’s job is to protect investors, and DeFi has no shortage of scams, rug pulls, fake decentralization, and projects that slap “community-owned” on a centralized mess and call it a day. Regulators are right to worry about hidden intermediaries, disguised control, and front-ends that look decentralized while one company quietly holds the levers. But there is a difference between policing fraud and pretending every technical participant in a decentralized system is a broker. One is regulation. The other is blunt-force category abuse.

That is why the coalition says broad broker rules could create a “chilling effect” on protocol development and U.S.-based deployment if validators, data service providers, communications network operators, and other infrastructure actors are swept into the wrong bucket. A validator secures and orders blockchain transactions. A data service provider or RPC provider helps users and apps read blockchain data. A communications network operator keeps the pipes moving. An interface developer builds the front end that lets people interact with smart contracts. None of that is the same thing as taking custody of customer assets and acting as a classic financial intermediary.

The format of regulation matters. That line from the coalition lands because it gets to the heart of the problem. A formal rulemaking process would force the SEC to define terms, explain boundaries, take public comments, and create a framework that people can actually plan around. Staff guidance, by contrast, is soft, changeable, and too easy to reinterpret later. In crypto, where product cycles move fast and legal uncertainty can kill a project before it starts, that difference is everything.

Hester Peirce, the SEC Commissioner known for questioning whether old-school broker definitions fit decentralized technologies, has already signaled that this issue deserves more careful treatment. That matters because this isn’t just a clash between regulators and the industry; it’s also an internal debate about whether securities law can be stretched to cover decentralized systems without turning into a regulatory pretzel.

The international angle makes the stakes even clearer. The European Union is moving forward with MiCA — the Markets in Crypto-Assets framework — which is becoming a reference point for how jurisdictions define crypto oversight. If the U.S. keeps muddling through with vague guidance while other regions write clearer rules, builders may simply go where the rules are easier to understand and less likely to shift overnight. Talent, liquidity, and infrastructure have a habit of following clarity. Funny how that works.

A formal SEC framework could also help with regulatory alignment across markets. That doesn’t mean every jurisdiction will copy-paste U.S. definitions, but it does mean a serious domestic rulebook can shape global expectations. The U.S. has a chance to set a workable standard here. Or it can keep producing uncertainty and then act surprised when projects choose to incorporate, launch, or expand elsewhere.

For regular users, this debate is not just legal trivia. It affects whether DeFi apps are available in the U.S., whether certain features get removed, whether fees go up because compliance gets messy, and whether the best tools are built for American users or quietly geofenced away from them. If a wallet, interface, or network service gets caught in the wrong category, the result may be fewer choices and more friction for the very people regulators say they want to protect.

The core message from the industry is simple: don’t regulate DeFi like 1990s brokerage infrastructure and then act shocked when the system breaks under the weight of the mismatch. If the SEC wants to preserve investor protection and support innovation at the same time, it needs definitions that reflect how decentralized networks actually work. Anything less risks pushing legitimate builders offshore while doing little to stop the scammers who are already happy to ignore the rules.

“The format of regulation matters.”

“without a stable, rules-based framework that separates technical participation from brokerage activity, the U.S. risks weakening its position”

• What do crypto and DeFi groups want from the SEC?
  They want formal DeFi broker definitions, not shifting staff guidance. The goal is to clearly separate non-custodial software and blockchain infrastructure from traditional broker activity.
• Why are validators and interface developers being mentioned?
  Because they support blockchain networks without acting as financial intermediaries. If they’re misclassified as brokers, the compliance burden could crush development and deployment.
• What does “non-custodial software” mean?
  It means tools that don’t hold user funds. In DeFi, that usually refers to software that helps users interact with protocols without taking control of their assets.
• Why is staff-level guidance a problem?
  Because it is informal and can change easily. That creates regulatory uncertainty for teams trying to build products, launch protocols, or serve U.S. users.
• What happens if the SEC keeps the current approach?
  Projects may delay launches, reduce features, limit U.S. access, or move activity offshore. That could weaken the U.S. position in crypto innovation.
• Does the SEC show any flexibility here?
  There are signs the agency may distinguish some non-custodial interfaces from traditional brokers, but the industry says that is not enough without formal rulemaking.
• Why does Hester Peirce matter in this debate?
  She has questioned whether existing broker definitions fit decentralized technologies, showing that the issue is being debated inside the SEC as well as outside it.
• Why does MiCA matter?
  The EU’s MiCA framework shows that clearer crypto rules are possible. It also raises pressure on the U.S. to stop dragging its feet while other jurisdictions build cleaner frameworks.
• What is the biggest risk of vague DeFi broker rules?
  That legitimate infrastructure gets treated like brokerage activity, which could slow innovation, increase legal risk, and push builders into less transparent markets.