MetLife, the largest U.S. life insurer, said earlier this year it was considering breaking up its business to shed the designation.

Its shares ended up more than 5 percent on the news, at $44.73. Those of other insurers designated systemically important, Prudential Financial Inc. and American International Group Inc., also rose.

"It's a major win for companies placed under this designation. It's a very large blow for the FSOC. But FSOC can appeal," said Raymond James analyst Steven Schwartz. "It's not over until it's over."

Deutsche Bank Markets Research analyst Yaron Kinar wrote in a note that because of potential appeals the company's status may not "be finalized for some time" and "we'd expect the company to continue down the path of separating its U.S. retail business despite the ruling."

Asset managers greeted the decision as good news with the potential to soften future regulation that their industry has been expecting. Earlier this month, the FSOC said it was discussing how to address the risks that their products could pose to financial stability.

The nonprofit, nonpartisan group Better Markets said, however, Collyer's decision threatens "the entire structure that protects the country and its taxpayers from future financial crashes caused by nonbanks."

The 2010 Dodd-Frank Wall Street reform law authorized regulators to designate nonbank companies as "systemically important," largely in response to the $182 billion government bailout AIG received during the 2008 financial crisis.

White House spokesman Josh Earnest declined to comment on the decision, but said crisis-era bailouts showed "it's not just banks on Wall Street that could potentially shake the foundation of our financial system."

"And if we're serious -- and the president certainly is -- about following through on a commitment to make sure that taxpayers are never in that position again, we need to make sure that our regulators ... can exercise, at least, some authority over nonbank institutions," he said at a White House briefing.

MetLife sued last year, saying the FSOC had not followed its own guidance and essentially changed the rules to ensure the designation was made.