Citadel Securities urged the US Securities and Exchange Commission (SEC) to take a cautious approach to decentralized finance (DeFI), arguing that certain systems that trade tokenized US stocks may resemble regulated market infrastructure and should be evaluated accordingly.
The crypto industry took to social media to express its outrage after the Dec. 2 letter, submitted as part of a hearing on how federal securities laws should apply to crypto trading platforms, became public.
The SEC, widely viewed as skeptical of the crypto sector under former chairman Gary Gensler, has taken a more conciliatory approach since President Donald Trump’s return to the White House. Under Gensler, the agency argued that most digital assets fell under existing securities laws. His tenure set the tone for a more confrontational regulatory landscape, particularly towards DeFi.
In its letter, Citadel said many automated protocols bring buyers and sellers together in ways comparable to traditional exchanges, although the mechanics rely on smart contracts rather than centralized operators.
Because these systems can execute trades using preset rules, Citadel argued that they can meet definitions attached to exchanges or broker-dealers, particularly when facilitating transactions in securities-linked products.
Citadel also said that any regulatory relief should come only after a clear examination of investor protection implications, and warned that inconsistent oversight across tokenized and traditional markets could lead to gaps in transparency and compliance.
The crypto community erupted on social media. Uniswap creator Hayden Adams criticized the submission, saying it effectively sought to treat open source developers as if they were centralized intermediaries.
He also pushed back on Citadel’s claim that DeFi cannot guarantee “fair access,” arguing that permissionless protocols expand, rather than limit, participation.
Cryptopolitics expert “BlockProf” added: “Citadel has just declared war on project crypto, taking arguments made by Gensler in his failed attempt to regulate DeFi and attacking the commissioner’s points. [Hester] Pierce in his dissent. The opposition letters will be extensive stay tuned.”
