Crypto and DeFi advocacy groups have pushed back against Citadel Securities’ call for the U.S. Securities and Exchange Commission to impose stricter rules on DeFi “intermediaries,” particularly in tokenized securities, arguing that the firm’s position is legally flawed.

In a letter sent to the SEC on Friday, organizations including the DeFi Education Fund, Andreessen Horowitz, The Digital Chamber, and the Uniswap Foundation said Citadel’s analysis misinterprets securities laws by attempting to extend registration requirements to entities with only indirect connections to DeFi transactions.

The dispute comes as the SEC continues to signal support for financial innovation while emphasizing compliance with existing regulations. Tokenization of real-world assets such as stocks and bonds has grown rapidly over the past year, raising complex regulatory questions despite its potential to modernize U.S. capital markets.

Tensions escalated after Citadel urged the SEC to fully identify intermediaries involved in trading tokenized U.S. equities, including decentralized protocols that it argues resemble traditional exchanges or broker-dealers. Crypto advocates counter that DeFi operates fundamentally differently from traditional finance, with no direct intermediaries and user-controlled assets.

Citadel maintains that while it supports tokenization, strong investor protections must remain in place. Meanwhile, DeFi groups argue that autonomous software and technological infrastructure should not be classified as intermediaries under existing securities laws, warning against regulatory overreach that could stifle innovation.