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Citadel Securities Challenges DeFi Framework in Letter to SEC, Sparking Industry Outrage
A Citadel Securities letter to the SEC argues that some DeFi systems resemble traditional exchanges and should face comparable oversight.
Updated Dec 11, 2025, 9:13 a.m. Published Dec 4, 2025, 10:39 a.m.
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What to know:
- Citadel Securities told the SEC that certain DeFi protocols handling tokenized U.S. equities may function like exchanges or broker-dealers because they match buyers and sellers through smart contracts.
- Citadel Securities said any exemptions for DeFi should follow a formal rulemaking process, warning that uneven oversight between tokenized and traditional markets could undermine investor protections.
- Uniswap’s Hayden Adams and other crypto commentators denounced the letter, saying it mischaracterized open-source developers as intermediaries and reflected a broader resistance to decentralized infrastructure.
Market making firm Citadel Securities urged the U.S. Securities and Exchange Commission (SEC) to take a cautious approach toward decentralized finance (DeFi), arguing that certain systems dealing in tokenized U.S. equities 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 consultation on how federal securities laws should apply to crypto trading platforms, became public.
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The SEC, widely viewed as skeptical of the crypto sector under former Chair 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 toward DeFi.
In its letter, Citadel Securities, which is a separate entity to Citadel, said many automated protocols bring together buyers and sellers in ways comparable to traditional exchanges, even if the mechanics rely on smart contracts rather than centralized operators.
As these systems can execute trades using preset rules, Citadel Securities argued they may satisfy definitions tied to exchanges or broker-dealers, particularly when they facilitate transactions in securities-linked products.
Citadel Securities also said any regulatory relief should come only after a clear examination of investor-protection implications, warning 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 Securities’s claim that DeFi cannot guarantee "fair access," arguing that permissionless protocols expand, rather than restrict, participation.
Crypto policy expert "BlockProf" added: "Citadel [securities] just declared war on project crypto, taking up arguments made by Gensler in his failed attempt to regulate DeFi and attacking the points made by Commissioner [Hester] Pierce in her dissent. The opposition letters will be extensive stay tuned."
CORRECTION, Dec. 10, 16:33 UTC: Changes name from Citadel to Citadel Securities, the market making firm.
