Why MEV Relays Are the New Focus for Watchdogs

MEV relays centralize power. These systems, operated by entities like Flashbots and BloXroute, act as private mempools where validators source transactions, creating a critical chokepoint for censorship and surveillance.

The SEC's new attack vector is infrastructure control. Regulators are not just suing exchanges; they are targeting the transaction supply chain that determines finality, a more effective control mechanism than chasing tokens.

This creates systemic risk. Relays like Titan Builder and Manifold now decide which transactions reach Ethereum's base layer, making them de facto gatekeepers subject to OFAC compliance demands.

Evidence: Over 90% of Ethereum blocks are now built by a handful of centralized builders, with Flashbots' SUAVE protocol aiming to decentralize this process in response.

Relays are the new validators. The shift to Proposer-Builder Separation (PBS) outsources block production to specialized builders, but the relay is the mandatory intermediary. This creates a single point of failure and censorship that watchdogs like the OFAC now target directly.

Opaque selection creates systemic risk. A relay's builder selection is a black box. The dominant Flashbots relay controls ~90% of Ethereum blocks, making its internal logic and governance a de facto protocol rule. This centralization invites regulatory scrutiny and creates a fragile system.

Regulators target the choke point. The OFAC sanctions compliance demonstrated that relays are the enforcement layer. Censoring transactions at the relay level is more efficient for regulators than pursuing thousands of individual validators, making relays the primary regulatory surface.

Evidence: Post-Merge, over 99% of Ethereum blocks are built via the PBS model, with the Flashbots, BloXroute, and Agnostic relays processing the vast majority. This consolidation makes the network's liveness dependent on fewer than ten entities.

Relays are the new choke point. Post-Merge, validators outsource block building to specialized builders via MEV-Boost relays. This centralizes censorship power, as a relay refusing to propagate a transaction prevents its inclusion in any block built through that relay.

OFAC compliance is now a relay-level filter. Major relays like BloXroute, Flashbots, and Manifold implemented filters to exclude OFAC-sanctioned addresses after the Tornado Cash sanctions. This created a two-tiered system where compliant relays have a higher chance of winning blocks.

The censorship metric is measurable. The 'censorship resistance' metric, tracked by organizations like Rated and EigenPhi, shows the percentage of blocks built without OFAC transactions. Periods of high MEV can push this above 90% on Ethereum, demonstrating systemic risk.

The counter-strategy is PBS bypass. Protocols like MEV-Share and SUAVE aim to decentralize block building by enabling permissionless, competitive markets for transaction ordering. This fragments the censorship vector across many actors instead of a few relay operators.

MEV relays are infrastructure. The SEC's case against Lido and Rocket Pool established that staking-as-a-service qualifies as a security. This legal precedent directly implicates relay operators like BloXroute and Agnostic, which control transaction ordering for billions in assets.

Relays create centralized points of failure. Unlike the distributed validator set, the relay network is an oligopoly. This centralized trust layer contradicts the 'decentralized software' narrative and provides a clear target for enforcement actions under existing financial regulations.

The precedent is Uniswap Labs. The SEC's Wells Notice to Uniswap did not target the UNI token or the protocol's immutable contracts. It targeted the frontend interface and wallet, the centralized points of user interaction and fee capture. Relays are the backend equivalent.

Evidence: Flashbots' SUAVE, a decentralized intent network, exists precisely to mitigate this regulatory risk by eliminating the need for trusted relays, demonstrating the industry's anticipatory shift.

Relays centralize transaction flow. They are the single point where builders submit blocks to validators, creating a natural chokepoint for surveillance and control. This centralization is more actionable for regulators than the distributed network of searchers or validators.

The clash is jurisdictional. Regulators will target relay operators like BloXroute and Flashbots for their role in enabling front-running and sandwich attacks, treating them as financial intermediaries. This contrasts with the hands-off approach to the underlying consensus layer.

Evidence: The SEC's case against Coinbase cited its staking service as a security; the same logic applies to relays that profit from transaction ordering. The PBS (Proposer-Builder Separation) framework, designed for decentralization, ironically created this centralized, targetable entity.