Oct. 15, 2023
Dear Secretary, Securities and Exchange Commission and committee: Re: file number s7-02-22 The proposed amendments seek to expand the definition of "exchange" to capture decentralized finance (DeFi) protocols. However, predetermining that DeFi protocols are securities exchanges is premature and risks stifling innovation. Per case law like SEC v. Howey, 328 U.S. 293 (1946), DeFi protocols have fundamentals distinct from securities and do not meet the legal definition. Treating everyday DeFi users like securities exchanges would be overbroad regulation. Attempting to label all DeFi protocols as securities exchanges presumes they are dealing in securities, when many deal in commodities or utilities. We must first properly test and evaluate each protocol before concluding it facilitates transactions in securities. Otherwise, we risk mislabeling commodities as securities absent evidence, as cautioned in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). Furthermore, decentralized protocols are operated by disparate users worldwide, not a centralized entity. Attempting to regulate every individual user like an exchange is impossible in practice. It would lead to mass unconstitutional enforcement against individuals not engaged in exchange-like conduct, violating due process rights affirmed in Anti-Fascist Committee v. McGrath, 341 U.S. 123 (1951). I recommend narrowly tailoring any amendments to specify only protocols proven to specifically deal in securities, not preemptively capture all of DeFi. Overbroad definitions could inadvertently classify non-security commodities as securities and regulate individuals in ways violating due process. Careful analysis of each protocol on its technical merits, not broad generalizations, should guide policy here. Thank you for your consideration, Sincerely Jimmy Concerned Citizen of the USA Columbus, Ohio