Crypto lobbyists are up in arms over the SEC’s newly launched Consolidated Audit Trail (CAT) database. They’re saying this thing unfairly targets anyone in the blockchain space.
Basically, the CAT is a massive data grab, a snoop-fest, collecting every bit of trading data across the U.S. securities markets. And it’s not sitting well with crypto folks who feel they’re being dragged into this without a reason.
The CAT came about thanks to SEC Rule 613, which got rolling after the financial crisis. The idea? To give the SEC more oversight of the markets, make sure no one’s pulling a fast one.
So now, this database collects all trading info from securities exchanges, broker-dealers, FINRA members—you name it. The SEC wants all this data to keep a closer eye on things.
But even though the rule doesn’t mention crypto or digital assets directly, the SEC’s opinion that crypto firms are basically like any other financial entity—“exchanges, brokers, dealers”—means these firms could be looped in too.
And that’s where the crypto lobbyists lose their minds.
A conservative group, the National Center for Public Policy Research, was already on the SEC’s case last April. They sued, calling this whole CAT thing unconstitutional.
They’re labeling it “one of the greatest government-mandated mass collections of personal financial data in U.S. history.” That’s a big claim, but they’re not alone in their fight.
The Blockchain Association (BA) and the DeFi Education Fund (DEF) jumped into the fray, filing an amicus brief supporting the lawsuit.
They’re saying Rule 613 is a disaster waiting to happen for crypto. The brief says if the SEC is serious about treating crypto players like traditional financial entities, then the CAT database could end up being a massive surveillance tool.
Picture this—a giant, fully transparent archive where every blockchain transaction is stored and available for Uncle Sam to sift through without needing any sort of warrant. Sounds like a privacy nightmare, right?
According to BA’s Marisa Coppel and DEF’s Amanda Tuminelli, this could expose everything from transaction IDs to wallet addresses. They wrote in a June op-ed, this is about looking at who’s buying what, when, and where—forever.
But it’s not just crypto advocates pushing back against this. Citadel Securities and the American Securities Association are also taking swings at the SEC. These guys sued the agency last fall, arguing against the CAT database.
And they’ve got a whole army behind them—think every big bank, brokerage, hedge fund, and asset manager in the U.S., plus various trade groups like the Financial Markets Association and the Managed Funds Association.
Even Citadel’s competitor, Virtu Financial, is on board with the lawsuit. It’s a massive coalition, and they’re all saying the same thing: the CAT goes too far.
The SEC isn’t backing down, though. They’re standing by the CAT, calling the lawsuits “meritless.” In their view, this database is just part of their job—keeping the markets clean and fair.
To them, calling the CAT a tool “to snoop on Americans’ personal financial decisions” is a stretch. The SEC has had some bad luck in court recently with crypto cases, so it’s no surprise they’re doubling down on their authority to oversee traditional markets.
And historically, when it comes to regulating TradFi, the SEC has had a pretty solid track record.