The CAT is a database that was first proposed in 2010 and launched in April. According to its official website, the CAT tracks orders throughout their lifecycle and identifies the broker-dealer who processes them, allowing regulators to effectively track activity in U.S. markets in Eligible Securities.

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The SEC proposed the 203-page rule that created the CAT in 2010 and passed it in 2012. The database is funded by its participants — the Financial Industry Regulatory Authority (FINRA) and 26 national securities exchanges. The CAT quickly sparked concerns about privacy and government overreach. The NCLA said:

“This class action complaint challenges the SEC’s shocking power grab to impose dystopian surveillance, unprovoked seizures, and actual or potential searches on millions of American investors.”

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The NCLA filed its lawsuit in April. The case attracted more than 50 amicus curiae (friend-of-the-court) briefs. The DeFi Education Fund and the Blockchain Association said in their briefs that the database discloses more information about blockchain investors than it was designed to due to the transparent nature of public blockchains. They explained:

“CAT […] combines personally identifiable information with wallet addresses that reveal blockchain-based user transactions. Therefore, anyone with access to CAT can not only see a person’s securities transactions, […] but also all of that person’s past, present, and future blockchain transactions.”

CAT has also been criticized as a security risk. It acts as a “honeypot” for hackers and is freely accessible by the SEC and its staff. However, the Securities Industry and Financial Markets Association trade group has stated that due to the lack of public access to the database, the SEC would be violating the Administrative Procedure Act if it used the database for rulemaking, since all data used for that purpose must be publicly available.

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