A federal appeals court struck down 2023 SEC regulations on funding a market surveillance system, ruling that the SEC did not justify allowing exchanges to pass costs to members. The decision is a setback for the Consolidated Audit Trail, aimed at providing regulators visibility into U.S. market operations. The SEC is considering its next steps.

The American Securities Association and Citadel Securities, who brought the lawsuit, praised the ruling as preventing a tax hike on American investors. The SEC split operating costs among buyers, sellers, and exchanges in 2023, drawing objections from the investment industry. The appeals court found the SEC’s justification for cost distribution to be arbitrary and capricious.

The SEC is directed to reassess the rule in line with the court’s decision. The CAT was created in response to the 2010 “flash crash” and aims to help regulators identify market manipulation. The ruling is another blow to SEC regulations under the Biden administration, facing opposition from industry and Republican lawmakers.

Read more at Yahoo Finance: US appeals court strikes down SEC rule on ‘audit trail’ funding