1.10 - Securities and Exchange Commission (SEC)
NOTE: THE SEC IS RAPIDLY PRODUCING TESTIMONY / GUIDANCE / ALERTS / ENFORCEMENT ACTIONS IN THIS SPACE. THIS PAGE MAY NOT BE ENTIRELY UP TO DATE. PLEASE DO YOUR OWN RESEARCH AND SEEK THE ADVICE OF AN ATTORNEY.
Overview
The SEC is the primary federal agency responsible for enforcing the federal securities laws and regulating the securities markets. Its jurisdiction over digital assets turns on whether a given token, coin, or arrangement constitutes a "security" — most commonly an "investment contract" — under the framework established by the U.S. Supreme Court in SEC v. Howey Co., 328 U.S. 293 (1946), discussed in detail below. Of all federal agencies, the SEC has been the most prolific in addressing digital assets, though the nature of its approach has shifted dramatically over time.
For the first decade of cryptocurrency's existence, the SEC provided limited formal guidance — that is, formally implemented regulations that had gone through public notice and comment before being published in the Code of Federal Regulations — on how it viewed digital assets. Instead, the agency applied existing securities law to new technological innovations through enforcement actions, public statements, investor alerts, and informal staff guidance. To the great frustration of market participants, individual speakers at the SEC routinely disclaimed that their statements represented the views of the Commission, and divisions within the SEC disclaimed that their guidance carried the force of law, leaving the industry to interpret an increasingly complex patchwork of non-binding signals.
Under Chairman Gary Gensler (April 2021–January 2025), the SEC pursued the most aggressive enforcement campaign against the crypto industry in its history, filing landmark actions against Coinbase, Binance, Kraken, and dozens of other firms while maintaining that the vast majority of crypto tokens were securities subject to existing registration requirements. That approach drew sharp criticism from industry participants and several SEC Commissioners, who argued the agency was pursuing "regulation by enforcement" rather than providing workable compliance frameworks.
The change in presidential administration in January 2025 brought a dramatic reversal. Under Acting Chairman Mark Uyeda and then Chairman Paul Atkins (confirmed April 2025), the SEC established a Crypto Task Force led by Commissioner Hester Peirce, systematically dismissed the major enforcement actions of the Gensler era, and issued a series of staff statements clarifying that certain categories of digital assets — including meme coins, proof-of-work mining rewards, staking rewards, and fully-reserved stablecoins — are not securities. The SEC and CFTC jointly launched "Project Crypto" to develop a comprehensive regulatory framework including a formal token taxonomy and tailored disclosure requirements, and Congress enacted the GENIUS Act in July 2025 — the first federal statute to explicitly carve payment stablecoins out of the SEC's jurisdiction. Comprehensive rulemaking under the working title "Regulation Crypto" was anticipated for 2026.
Howey Test
If there is one guiding star to the SEC’s approach, however, it is to apply the Howey test to determine whether the digital asset is an “investment contract.” The test comes from SEC v. Howey Co., 328 U.S. 293 (1946). The case arose from the SEC’s attempted enforcement of Securities Act of 1933 against a citrus grove. The grove was selling small plots of land in its grove coupled with a services contract for that plot’s maintenance by the grove. The SEC argued the arrangement was actually an investment contract that had not been registered and was not exempt.
The U.S. Supreme Court established the following test to determine whether the arrangement at issue, and any business arrangement, was an “investment contract” as defined by § 2(1) of the Securities Act of 1933:
“In other words, an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.”
Howey, 328 U.S. at 298-99. This test, the Court further explained was meant to be flexible, “one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” Howey, 328 U.S. at 299.
Practitioners should note that in Howey the Supreme Court specifically rejected the notion that an arrangement is not an investment contract merely because it “is not speculative or promotional in character and where the tangible interest which is sold has intrinsic value independent of the success of the enterprise as a whole.” Id. at 301. Rather, if the “the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others,” then “it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.” Id. This caveat may have particular application to altcoins, NFT projects, and DAOs, among others.
Thus the SEC uses this test to determine whether digital assets contain, in the words of Howey, the classic “elements of a profit-seeking business venture,” namely that “investors provide the capital and share in the earnings and profits; the promoters manage, control and operate the enterprise.” Id. at 300. The ways in which the SEC has discussed and applied the Howey test to specific digital asset issues are discussed below.
Guidance
Statements, Speeches, and Testimony
Prior to 2021, the SEC’s remarks on digital assets and cryptocurrency were relatively few and far between. The notable exceptions are a statement from former SEC Chair Jay Clayton, warning investors (both individual and professional) to be extremely wary of initial coin offerings, as none were registered with the SEC and thus did not have the concomitant disclosure protections of registered securities filings. See Jay Clayton, Statement on Cryptocurrencies and Initial Coin Offerings (2017.12.11). He also cautioned professionals in particular to make upfront determinations about whether securities laws apply to a particular use case, and noted that in his view most ICOs to date were securities offerings.
Roughly six months later, William Hinman, then-Director of the Division of Corporate Finance, gave remarks at the Yahoo Finance All Markets Summit, which have been subject to controversy almost since they were made. See William Hinman, Remarks at the Yahoo Finance All Markets Summit: Crypto, Digital Asset Transactions: When Howey Met Gary (Plastic) (2018.06.14). In those remarks, Hinman remarked that neither Bitcoin nor Ethereum were likely securities, since they were sufficiently decentralized. He also noted that digital asset projects that start as securities could later transform into non-securities, depending on the level of their decentralization.
The remarks caused controversy on two fronts. First, they seemed to grant preferential status to Bitcoin (then roughly 9 years old) and Ethereum (barely 2 years old), to the exclusion of numerous other cryptocurrency projects. Second, it introduced an unusual concept of digital assets’ status as securities changing over time, depending on the assets’ properties. Although Hinman gave the usual disclaimer that his remarks were not the view of the SEC, significant industry players, most notably Ripple Labs, Inc., claimed to rely on the statements in guiding their compliance decisions in the absence of other guidance from the SEC. On December 22, 2020, the SEC filed suit against Ripple. Hinman’s remarks have been the subject of much argument throughout the litigation. See SEC v. Ripple Labs, Inc., No. 20-cv-10832 (S.D.N.Y. 2020.12.22).
That reliance may in part be due to then-Chairman Clayton's own remarks. Indeed, he testified before Congress that the process Hinman identified was "the approach staff takes to evaluate whether a digital asset is a security." Jay Clayton, Testimony on “Oversight of the U.S. Securities and Exchange Commission” Before the Committee on Financial Services (2018.06.21). He reiterated that statement two months later in a speech:
From the latest SEC filing: “The Speech was not binding SEC policy--that is, a pronouncement of the Commission itself, the Commissioners appointed by the President with the Senate’s advice and consent.” The head of the Commission: pic.twitter.com/SCRW8VngIF
— Eleanor Terrett (@EleanorTerrett) July 27, 2022
Jay Clayton, Remarks on Capital Formation at the Nashville 36|86 Entrepreneurship Festival (2018.08.29). Shortly afterwards, however, Clayton issued a statement that, at least arguably, implicitly retracted this endorsement, noting that "all staff statements are nonbinding and create no enforceable legal rights or obligations of the Commission or other parties." Jay Clayton, Statement Regarding SEC Staff Views (2018.09.13).
Following his appointment by President Biden in April 2021, Chairman Gary Gensler made numerous statements regarding the SEC's priorities with respect to cryptocurrency and enforcement of the securities laws in the digital asset space. Starting in September 2021, Gensler testified before the Senate Committee on Banking that “large parts of the field of crypto are sitting astride of — not operating within — regulatory frameworks,” commented that it was akin to “the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted,” and gave a high level overview of the areas of the field the SEC was looking to regulate. See Gary Gensler, Testimony Before the United States Senate Committee on Banking, Housing, and Urban Affairs, at 5 (2021.09.14). Those included: (1) crypto tokens, (2) crypto exchanges and lenders, (3) stablecoins, (4) investments offering exposure to crypto assets, and (5) custody of crypto assets. Id. at 5–6.
Gensler also noted the SEC was working with the CFTC because the two agencies had “overlapping jurisdiction” of certain crypto assets, and also with “the Federal Reserve, Department of Treasury, Office of the Comptroller of the Currency, and other members of the President’s Working Group on Financial Markets.” His testimony highlighted the rapidly intertwining regulatory landscape and the need for crypto companies to stay abreast of the guidance from multiple federal agencies. Emphasizing the significant enforcement actions the SEC had already taken, Gensler concluded by noting that “the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities.” Id. at 6. Gensler repeated the same testimony before the House Committee on Financial Services several weeks later. See Gary Gensler, Testimony Before the United States House of Representatives Committee on Financial Services (2021.10.05).
Speaking to the industry directly, Gensler appeared at DC Fintech Week on October 21, 2021. There Gensler provided only cursory acknowledgement of some of the biggest innovations brought on by crypto technology, providing no guidance on the SEC’s regulatory priorities. Instead, he offered only the vague statement that “[a]s new technologies come along and change business models in finance, we need to continue to work toward our public-policy goals,” namely protecting investors, maintaining efficient markets, facilitating capital formation, and policing illegal activity, ensuring financial inclusion and access, and promoting financial stability. See Gary Gensler, Prepared Remarks At DC Fintech Week (2021.10.21).
Late in 2021, Gensler prepared a statement responding to the President’s Working Group Report on Stablecoins. See Gary Gensler, President’s Working Group Report on Stablecoins (2021.11.01). (Details about that report are discussed separately here.) Gensler’s statements were brief, noting simply that the report concluded some stablecoins “may be securities, commodities, and/or derivatives,” that stablecoins could assist those looking to avoid anti-money laundering, tax compliance, and sanctions, and that the SEC would work with the CFTC “deploy the full protections of the federal securities laws and the Commodity Exchange Act to these products and arrangements, where applicable.”
In 2022, Gensler appeared before Congress multiple times, in addition to giving several public statements, largely reiterating an expansive view of what constitutes a security.
Gary Gensler, Testimony Before the United States Senate Committee on Banking, Housing, and Urban Affairs (2022.09.15)
Gary Gensler, Speech, Kennedy and Crypto (2022.09.08)
Gary Gensler, Prepared Remarks On Crypto Markets Penn Law Capital Markets Association Annual Conference (2022.04.04)
In September 2022, he suggested informally that after Ethereum moved to a proof-of-stake consensus mechanism, it may satisfy the Howey test. See Paul Kiernan & Vicky Ge Huang, Ether's New 'Staking' Model Could Draw SEC Attention (2022.09.15).
Through 2023 and 2024, Gensler continued to testify before Congress and make public statements doubling down on the view that the vast majority of crypto tokens are securities and that existing law was sufficient to regulate the industry. His public messaging focused on urging crypto companies to "come in and register" with the SEC, while acknowledging no clear pathway to registration existed for most crypto-native businesses. See Gary Gensler, Testimony Before the Subcommittee on Financial Services and General Government, U.S. House Appropriations Committee (2023.04.04); Gary Gensler, Testimony Before the United States Senate Committee on Appropriations Subcommittee on Financial Services and General Government (2023.09.12).
Gensler's tenure coincided with the most aggressive period of crypto enforcement in the agency's history, discussed further below. He oversaw the filing of landmark enforcement actions against Coinbase, Binance, Kraken, and numerous other crypto firms throughout 2023 and 2024, while simultaneously declining to provide clearer guidance on how the securities laws applied to specific digital assets.
On November 21, 2024, Gensler announced he would step down as Chairman effective January 20, 2025, coinciding with the change in presidential administration. See Gary Gensler, Statement on the Resignation of Chair Gary Gensler (2024.11.21).
Commissioner Mark T. Uyeda was designated Acting Chairman on January 20, 2025. His tenure, though brief, marked an immediate and dramatic shift in the SEC's approach to crypto. On January 21, 2025, Uyeda announced the formation of a Crypto Task Force led by Commissioner Hester M. Peirce, signaling a new collaborative approach to crypto regulation. See SEC, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force (2025.01.21). The Task Force's stated mission was to "develop a comprehensive and clear regulatory framework for crypto assets," "draw clear regulatory lines," "provide realistic paths to registration," "craft sensible disclosure frameworks," and "deploy enforcement resources judiciously." Id.
Paul S. Atkins was confirmed as the 34th Chairman of the SEC by the U.S. Senate on April 9, 2025 and sworn in on April 22, 2025. Atkins had long been a vocal advocate for clearer, less enforcement-driven crypto regulation, and his confirmation accelerated the policy reversal already underway. Under his leadership, the SEC continued to dismiss enforcement actions brought during the Gensler era, issued a series of staff statements clarifying the boundaries of the securities laws as applied to crypto, and launched a series of public roundtables to gather industry input on a prospective regulatory framework.
Commissioner Peirce, in a statement titled "The Journey Begins," outlined the Crypto Task Force's agenda, emphasizing that the SEC's past approach of "regulation by enforcement" had created confusion and driven innovation offshore. See Hester M. Peirce, The Journey Begins (2025.02.04).
Written Guidance
The SEC's written guidance on digital assets has evolved from limited, heavily disclaimed staff analyses to a growing body of more definitive statements under the Crypto Task Force. The following subsections trace that evolution, from early frameworks to the most recent policy pronouncements.
Strategic Hub for Innovation and Financial Technology
For many years, the report issued by the Strategic Hub for Innovation and Financial Technology (“FinHub”), a division of the SEC, provided the only information on how the SEC would approach defining an “investment contract” under Howey for digital assets. See SEC, Strategic Hub for Innovation and Financial Technology, Framework for “Investment Contract” Analysis of Digital Assets (2019.04.03).
Note that the FinHub specifically disclaims that its views represent those of the entire SEC, noting that the document “is not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved its content.”
There, the FinHub notes that the first two prongs of the Howey test — investment of money and a common enterprise — are usually met. The focus therefore, according to FinHub, is on whether there is a reasonable expectation of profits derived from the efforts of others. FinHub divides that prong into its two component parts and lists some two dozen factors that are relevant to each, based largely on the activities of what it calls an active participant (“AP”), defined as a “promoter, sponsor, or other third party” of the digital asset. According to FinHub, the more each factor is present, the more likely it is these components of the Howey test are satisfied. Id. In broad strokes, the more active the involvement of the promoter will be after the sale (e.g., completing a roadmap to add value to the asset in the future) and the more promotion of the asset as transferable and likely to appreciate there is, the more likely it is that the digital asset satisfies the definition of an investment contract.
FinHub also denotes nearly a dozen countervailing factors that would weigh in favor of the digital asset not being an investment contract. Among others, those factors include that the digital asset is fully developed; is readily exchangeable for existing goods or services; if a virtual currency, it is readily usable to make payments in many contexts; and it is not expected to appreciate materially, or any such appreciation would be incidental to its functionality.
Division of Trading and Markets
The SEC’s Division of Trading and Markets, together with the Financial Industry Regulatory Authority (“FINRA”) issued a joint statement on key issues in intermediation and custody of digital assets, particularly as it relates to applying the Customer Protection Rule to digital assets. SEC & FINRA, Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities (2019.07.08). The Customer Protection Rule is more formally known as Rule 15c3-3 under the Securities Exchange Act of 1934.
Note that the Division of Trading and Markets specifically disclaims that its views represent those of the entire SEC, noting that the document “is not a rule, regulation, guidance, or statement of the [SEC] or FINRA, and the [SEC] and FINRA’s Board have neither approved nor disapproved its content. This statement does not alter or amend applicable law and has no legal force or effect..”
In their joint statement, the SEC and FINRA (the “Staffs”) address entities that engage in providing access to digital assets by serving as a broker-dealer. They divide these broker-dealers into two categories: custodial and non-custodial. For non-custodial broker-dealers of digital assets, the Staffs note that “[g]enerally speaking, noncustodial activities involving digital asset securities do not raise the same level of concern among the Staffs, provided that the relevant securities laws, SRO rules, and other legal and regulatory requirements are followed.” (emphasis added). In this scenario, the broker-dealer merely connects the buyer and seller and the buyer and seller settle the transaction directly.
The meat of the statement by the Staffs deals with broker-dealers who actually take custody of digital assets. In this scenario, the broker-dealer must comply with the Customer Protection Rule. But as the Staffs acknowledge, this area is fraught with difficulty because “custody” on the blockchain is fundamentally different than custody of traditional securities. As the staffs readily acknowledge, a broker-dealer may even “face challenges in determining that it, or its third-party custodian, maintains custody of digital asset securities” due to the fact that having private keys to a digital asset wallet does not necessarily ensure that the broker-dealer alone can transact from the wallet or reverse mistaken transactions. (The Staffs do not address how multi-signature wallets might affect its analysis.) The Staffs go on to raise a number of other questions broker-dealers should consider, including:
maintaining books records,
auditing,
the Securities Investor Protection Act and its different definition of a security, and
control locations
The Staffs do not provide answers to the questions they raise, but do invite firms to contact them directly to work through these issues.
Division of Examinations
The SEC’s Division of Examinations issued a Risk Alert in early 2021 regarding digital asset securities and specific considerations for firms involved in the space to consider in advance of a specific regulatory examination. SEC, Division of Examinations, Risk Alert: The Division of Examinations’ Continued Focus on Digital Asset Securities (2021.02.26).
Note that the Division of Examinations specifically disclaims that its views represent those of the entire SEC, noting that the document “is not a rule, regulation, or statement of the [Commission.] The Commission has neither approved nor disapproved its content.”
The alert specifically focuses on compliance obligations of investment advisers, broker-dealers, and transfer agents and the areas the division will focus on during examinations. For investment advisers, the division says it will focus on: portfolio management; books and records; custody (including access to private keys and unauthorized transactions); disclosures; pricing client portfolios; and registration issues.
For broker-dealers, the focus has some overlap with investment advisers, but expands to include: safekeeping of funds and operations; registration requirements (particularly applied to affiliates); anti-money laundering (including OFAC compliance, filing suspicious activities reports, and performing customer due diligence, also known as KYC or “know your customer”); offerings (including due diligence and disclosures related to a digital asset offering); conflicts of interest; outside business activities (e.g., registered representatives offering digital asset services separately from their broker-dealer employer).
For national exchanges, the division will focus on whether the exchange is required to, and actually has, registered as an exchange pursuant to the Exchange Act and evaluate its compliance with Regulation ATS, the regulation that exempts alternative trading systems from registration requirements but imposes requirements to protect confidential subscriber trading information.
Finally, for transfer agents, the division says it will focus on whether the agent is following SEC rules “that are intended to facilitate prompt and accurate clearance and settlement of securities transactions,” and of course whether the agent has properly registered with the SEC.
Compliance officers at any company in, or potentially within, the purview of these regulations would do well to shore up their policies, procedures, and internal auditing in advance of an examination.
Report of Investigation Into the DAO
Not long after the birth of the Ethereum blockchain in 2015, Slock.it developed and implemented one of the first decentralized autonomous organizations (a “DAO”) to operate on the blockchain. The concept was that individuals could exchange ETH (the currency on the Ethereum blockchain) for The DAO tokens which gave the owners voting rights and other privileges in the organization, which would largely operate autonomously once voting rights were exercised through code. Among token holders’ rights was the ability to vote for projects to use portions of the pooled funds raised from selling The DAO tokens. Token owners could not vote on projects, however, until Slock.it’s appointed Curators whitelisted (gave approval) to a project to proceed to a vote.
After announcing The DAO, the project gained considerable attention and enthusiasm from potential investors. After opening the sale of its tokens to the public in mid-2016 (of which there was an unlimited supply), The DAO raised what was then the equivalent of $150 million USD in ETH in a month. Unfortunately, shortly after the ability to buy tokens was closed, a hacker exploited The DAO’s code to siphon nearly one third of the ETH raised into a subsidiary or “child” DAO. Eventually, to resolve the hack and restore the lost ETH to investors, Slock.it and Vitalik Buterin proposed a hard fork to the Ethereum blockchain, which was eventually approved by the numerous users of the blockchain, restoring the stolen investment. (This very brief history is derived from Laura Shin’s heavily researched account in The Cryptopians.)
About a year later, in 2017, the SEC caught up to what had very rapidly taken place and issued a report on The DAO but declined to initiate an enforcement action “based on the conduct and activities known to the Commission at this time.” SEC, Exchange Act Rel. No. 81207, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (2017.07.25).
The report took The DAO to task for very clearly being an issuance of unregistered securities, particularly as it related to the “reliance on the efforts of others” prong of the Howey test. Id. at 12–15. The SEC focused on the fact that Slock.it and the Curators exercised significant managerial control over The DAO that vastly overshadowed the limited utility of the voting rights of token holders. Indeed, as the report notes, “DAO Token holders could only vote on proposals that had been cleared by the Curators” — Curators who were chosen by Slock.it and could only be removed (or new ones added) through a process controlled by the existing Curators. Id. at 13, 14. The vast dispersal of The DAO token holders and lack of a way to communicate easily with other holders led the SEC to conclude that the voting rights were “akin to those of a corporate shareholder.” Id. at 15. The report concludes by exhorting entities (including individuals) that issue such securities to register the securities, and new exchanges created for their trading, or face the consequences. Id. at 15–18.
Although the report is helpful in the sense that it provides a detailed analysis of a DAO project under Howey — definitively concluding The DAO tokens were securities — it is unhelpful in the sense that it offers no explanation for why the "conduct and activities known to the Commission" were insufficient to warrant an enforcement action at the time.
Staff Accounting Bulletin No. 121
In March 2022, the SEC's Office of the Chief Accountant issued Staff Accounting Bulletin No. 121 ("SAB 121"), which required entities that safeguard crypto assets for platform users to record a liability and corresponding asset on their balance sheets at fair value. See SEC, Staff Accounting Bulletin No. 121 (2022.03.31). The bulletin was targeted at crypto custodians and exchanges but had far-reaching implications for banks and traditional financial institutions considering offering crypto custody services. Because bank capital requirements are driven by the size of balance sheet liabilities, SAB 121 effectively made it prohibitively expensive for regulated banks to hold crypto assets in custody for their customers, creating what critics called a regulatory moat around the crypto custody market.
SAB 121 proved deeply controversial. Congress passed a resolution under the Congressional Review Act to overturn it, but President Biden vetoed the resolution on May 31, 2024. See The White House, Message to the House of Representatives — President's Veto of H.J.Res. 109 (2024.05.31). The Government Accountability Office (GAO) had previously concluded that SAB 121 constituted a "rule" under the Congressional Review Act, meaning it should have gone through the notice-and-comment rulemaking process. See Government Accountability Office, Securities and Exchange Commission — Staff Accounting Bulletin No. 121 (2023.10.31).
Staff Accounting Bulletin No. 122
On January 23, 2025 — just three days after the change in administration — the SEC's Office of the Chief Accountant rescinded SAB 121 by issuing Staff Accounting Bulletin No. 122 ("SAB 122"). See SEC, Staff Accounting Bulletin No. 122 (2025.01.23). SAB 122 reversed the requirement that crypto custodians report custodied crypto assets as liabilities on their balance sheets, returning entities to the existing ASC 450 framework for evaluating contingent liabilities. The rescission was among the first substantive policy actions taken by the new SEC leadership and was widely seen as clearing the path for banks and traditional financial institutions to enter the crypto custody space.
Crypto Task Force
On January 21, 2025, Acting Chairman Uyeda announced the formation of the SEC Crypto Task Force, led by Commissioner Hester M. Peirce. See SEC, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force (2025.01.21). The Task Force was charged with developing a comprehensive regulatory framework for crypto assets through collaboration with industry, academics, and other stakeholders.
The Task Force embarked on an ambitious schedule of public roundtables beginning in March 2025, inviting industry participants, academics, and critics to discuss key regulatory questions. The initial "Spring Sprint" roundtables included:
DeFi and the American Spirit (2025.06.09)
In the fall of 2025, the Task Force expanded its outreach beyond Washington with a series of "On the Road" roundtables in major cities across the country, and announced a roundtable on financial surveillance and privacy. See SEC, On the Road: SEC Crypto Task Force to Host a Series of Roundtables Across the U.S. (2025.08); SEC, SEC Crypto Task Force to Host Roundtable on Financial Surveillance and Privacy (2025.12.15).
Staff Statements Under the Crypto Task Force
Beginning in early 2025, the SEC's Division of Corporation Finance issued a series of staff statements clarifying the application (or non-application) of the federal securities laws to specific categories of crypto activity. These statements, while carrying the standard disclaimer that they are not rules or regulations of the Commission, represent a significant change in the SEC's approach — providing affirmative guidance about what is not a security rather than relying solely on enforcement to define the boundaries after the fact.
Meme Coins. On February 27, 2025, the Division of Corporation Finance issued a statement concluding that the offer and sale of "meme coins" — crypto assets "inspired by internet memes, characters, current events, or trends for which the promoter does not offer or promise any particular utility" — do not involve the offer and sale of securities under federal securities law. See SEC, Division of Corporation Finance, Staff Statement on Meme Coins (2025.02.27). The Division reasoned that meme coins are not "investment contracts" under the Howey test because purchasers do not invest in a common enterprise with a reasonable expectation of profits derived from the efforts of others. Instead, the value of meme coins is "derived from speculative trading and the social dynamics associated with these communities, not from the managerial or entrepreneurial efforts of others." Id. Commissioner Caroline Crenshaw issued a sharp dissent, noting the statement "provides a roadmap for bad actors." See Caroline A. Crenshaw, Response to Staff Statement on Meme Coins: What Does it Meme? (2025.02.27).
Proof-of-Work Mining. On March 20, 2025, the Division issued a statement that proof-of-work ("PoW") crypto mining activities — both solo mining and participation in mining pools — do not constitute securities transactions under the federal securities laws. See SEC, Division of Corporation Finance, Statement on Certain Proof-of-Work Mining Activities (2025.03.20). The Division concluded that the rewards earned through PoW mining are "administrative or ministerial" rather than derived from the entrepreneurial or managerial efforts of others, and thus do not satisfy the Howey test. The statement applies only to PoW mining and does not address proof-of-stake or other consensus mechanisms.
Staking and Staking Rewards. On May 29, 2025, the Division issued a statement addressing the application of federal securities laws to certain proof-of-stake ("PoS") protocol staking activities. See SEC, Division of Corporation Finance, Statement on Certain Protocol Staking Activities (2025.05.29). The Division concluded that staking activities on a PoS blockchain network do not constitute securities transactions under the federal securities laws when participants stake tokens to validate transactions and earn protocol rewards, provided certain conditions are met. Specifically, the statement applies when: (1) the participant operates their own validator node or delegates to a validator that operates a node; (2) the staking rewards are derived algorithmically from the protocol itself (i.e., block rewards or transaction fees), not from the entrepreneurial or managerial efforts of a third party; (3) the staked tokens themselves are not securities; and (4) there is no separate investment contract or pooled investment arrangement beyond the basic protocol mechanics. The Division emphasized that this analysis is limited to "protocol-level" staking and does not extend to third-party staking-as-a-service products that may involve profit-sharing arrangements, commingled funds, or managerial discretion — all of which may present separate securities law issues. Commissioner Hester Peirce issued a concurring statement supporting the Division's approach but noting the inherent difficulty in drawing bright lines around what constitutes "protocol-level" versus "service-level" staking. See Hester M. Peirce, Statement on Statement on Certain Protocol Staking Activities (2025.05.29).
Stablecoins. On April 4, 2025, the Division issued a statement that certain USD-backed, fully reserved, non-yield-bearing stablecoins ("Covered Stablecoins") are not securities under the Securities Act or the Exchange Act. See SEC, Division of Corporation Finance, Statement on Stablecoins (2025.04.04). To qualify, a stablecoin must be: (1) backed one-for-one by U.S. dollars or low-risk liquid reserves such as U.S. Treasury securities or money market funds; (2) redeemable at a fixed one-for-one rate; and (3) marketed for use in payments and value transfer, not as an investment. The statement expressly excludes algorithmic stablecoins, yield-bearing tokens, and stablecoins pegged to non-U.S. dollar assets.
The GENIUS Act
On July 18, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act ("GENIUS Act") was signed into law, marking the first comprehensive federal legislation governing stablecoins and the first statute to explicitly carve a category of digital asset out of the SEC's jurisdiction. The Act establishes a federal licensing and supervisory framework for stablecoin issuers and, critically, provides that a "payment stablecoin" — as defined by the Act — is not a "security" within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. The statutory exclusion largely mirrors the SEC staff's April 2025 stablecoin statement but carries the force of law rather than the limited weight of a staff statement. The Act assigns primary regulatory authority over stablecoin issuers to banking regulators rather than the SEC, though the SEC retains antifraud authority.
Project Crypto and the Token Taxonomy
In July 2025, Chairman Atkins publicly outlined "Project Crypto," a comprehensive initiative to develop a tailored regulatory framework for digital assets. The initiative, developed in collaboration with the CFTC, seeks to address the regulatory uncertainty that had characterized the prior decade of crypto regulation. In November 2025, the SEC released the most detailed articulation of Project Crypto's ambitions, including: (1) a formal token taxonomy to classify digital assets by function and risk profile; (2) a refined analytical framework for applying the Howey test to crypto assets; (3) a prospective rulemaking titled "Regulation Crypto," which would establish tailored disclosure requirements, registration exemptions, and safe harbors for digital asset offerings; (4) an "innovation exemption" allowing firms to test novel business models under regulatory supervision; and (5) guidance on the intersection of tokenized securities with existing market structure rules. Paul S. Atkins, The SEC’s Approach to Digital Assets: Inside “Project Crypto” (2025.11.12). Comprehensive rulemaking was anticipated for 2026.
Regulation through Enforcement
The SEC has brought more cryptocurrency-related enforcement actions than any other federal agency — and more than all other categories of its cyber enforcement combined. According to Cornerstone Research, the SEC brought 207 cryptocurrency-related enforcement actions between 2013 and 2024, imposing approximately $7.57 billion in monetary penalties. The Gensler administration alone (April 2021–January 2025) accounted for 125 actions and $6.05 billion in penalties. In 2025, under new leadership, enforcement fell dramatically to approximately 13 actions — reflecting the sharp policy reversal discussed below. See Cornerstone Research, SEC Cryptocurrency Enforcement: 2024 Update (2025.01).
Because many of these actions resulted in quick settlements (or totally collapsed enterprises), their precedential nature is often limited to an understanding of what alleged facts triggered the SEC to bring such actions. As the header on its webpage suggests, however, an “initial coin offering” will almost certainly trigger such an action. See, e.g., In re Loci, Inc. and John Wise (2021.06.22); In re Blotics LTD. f/d/b/a Coinschedule LTD., File No. 3-20398 (2021.07.14).
Beginning in 2022, the SEC also scrutinized NFTs that appeared to operate similarly to ICOs, resulting in the enforcement actions against Impact Theory and Stoner Cats in 2023, discussed below. See Matt Robinson, SEC Scrutinizes NFT Market Over Illegal Crypto Token Offerings (2022.03.02). In response to the SEC's investigative requests to NFT marketplaces, a bipartisan group of members of Congress sent a letter to the SEC demanding information about the scope of the SEC's use of voluntary investigative requests to obtain information from blockchain and crypto firms over the last five years. The letter also commented that the SEC's use of the Division of Examination and Division of Enforcement's authority to obtain the information was "better suited to the SEC's divisions charged with seeking public commentary as part of the rulemaking process."
Outright fraudulent offerings are similarly likely to draw SEC enforcement:
SEC v. Uulala, Inc., Oscar Garcia, and Matthew Loughran, No. 5:21-cv-01307 (C.D. Cal. 2021.08.04);
SEC v. Kristijan Krstic (a/k/a Felix Logan), John DeMarr, and Robin Enos, 21 Civ. 0529 (E.D.N.Y. 2021.02.01);
SEC v. Stefan Qin, Virgil Technologies LLC, Montgomery Technologies LLC, Virgil Quantitative Research, LLC, Virgil Capital LLC, and VQR Partners LLC, No. 1:20-cv-10849 (E.D.N.Y. 2020.12.22).
Harder questions arose with the establishment of new blockchain / distributed ledger networks and the tokens or cryptocurrencies that exist on them. The SEC's suit against Ripple Labs, Inc. for issuing unregistered securities in the form of its XRP token raised a number of serious questions for those involved in large-scale crypto projects. See SEC v. Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen, No. 1:20-cv-10832 (S.D.N.Y. 2020.12.22). There Ripple raised money to fund its operations, and to implement a use-case for its XRP tokens, through two avenues: (1) traditional equities offerings in the company; and (2) public sales of the XRP tokens. The SEC took issue with the token sales, focusing on the lack of any practical use for the tokens at the time of sale, the promotion of the tokens as an investment, and the information asymmetry between Ripple's founders (who directed the sales) and those purchasing the tokens. The case, which produced the landmark summary judgment decision discussed below, concluded in August 2025 when both sides dismissed their pending appeals.
Beginning in late 2021, the SEC also targeted crypto lending platforms. These enforcement actions focus on the fact that both the Securities Act and the Exchange Act include in their definition of a security “any note,” a common phrase for documentation for a loan. See 15 U.S.C. § 77b(a)(1) (Securities Act); 15 U.S.C. § 78c(a)(10) (Exchange Act).
Courts have narrowed “any” down to exclude a number of common consumer transactions such as mortgages and unsecured bank loans, judicial exceptions that were accepted by the U.S. Supreme Court in Reves v. Ernst & Young, 494 U.S. 56 (1990). Absent a judicial exception under the “family resemblance” test of Reves — i.e., the note is similar to an existing exception, or the litigant convinces the court to adopt a new exception — however, a note would remain a security under either the Securities Act or the Exchange Act. Id. at 64–66.
The Court later further clarified that a fixed rate of return does not prevent an instrument from being a security. See SEC v. Edwards, 540 U.S. 389, 396 (2004) (discarding footnote 4 of Reves as “passing dictum that would frustrate Congress’ intent to regulate all of the ‘countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.'” (quoting SEC v. Howey Co., 328 U.S. 293, 299 (1946))). Despite the exceptions, however, the presumption is that “any note” is a security until proven otherwise. Reves, 494 U.S. at 65 (“[W]e begin with a presumption that every note is a security.”).
Utilizing this framework, the SEC sought in late 2021 and early 2022 to require crypto firms to register fixed income offerings as securities, or to threaten them with enforcement actions if they will not do so. Coinbase, after receiving a Wells notice from the SEC of an imminent enforcement action related to its Lend program, decided to scrap it. See Mitchell Clark, Coinbase cancels Lend program launch after SEC fight (2021.09.20). And Blockfi, which proceeded with its crypto lending product for some time, agreed to pay $100 million in fines to the SEC and to 32 states and to register its lending product as a security under the Securities Act. In re Blockfi Lending LLC, File No. 3-20758 (2022.02.14).
The Enforcement Surge of 2023
Beginning in early 2023, the SEC launched the most aggressive enforcement campaign against the crypto industry in the agency's history. In the span of roughly eleven months, the agency filed landmark actions against nearly every major U.S.-facing crypto exchange and multiple other firms, deploying sweeping legal theories that treated virtually all crypto tokens as securities and their trading platforms as unregistered exchanges, broker-dealers, and clearing agencies.
Staking as Securities: Kraken. In February 2023, the SEC settled charges against Payward Ventures, Inc. (d/b/a "Kraken") for the unregistered offer and sale of its crypto staking-as-a-service program. See SEC, Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million (2023.02.09). The SEC alleged that Kraken advertised annual returns of up to 21% on staked crypto assets while retaining discretion over whether to pay any returns at all. Kraken agreed to cease U.S. staking operations and paid $30 million in combined disgorgement, prejudgment interest, and civil penalties. The settlement was the first enforcement action specifically targeting crypto staking as a securities offering, and sent a clear signal that the SEC viewed staking services as investment contracts under Howey. Commissioner Peirce dissented sharply, noting the settlement "sends a confusing message about how the SEC plans to regulate the crypto industry." See Hester M. Peirce, Kraken Down (2023.02.09).
Crypto Lending: Genesis and Gemini. On January 12, 2023, the SEC charged Genesis Global Capital, LLC and Gemini Trust Company, LLC with the unregistered offer and sale of securities through the "Gemini Earn" crypto asset lending program. See SEC, SEC Charges Genesis and Gemini for the Unregistered Offer and Sale of Crypto Asset Securities through the Gemini Earn Lending Program (2023.01.12). Through the program, retail investors tendered crypto assets to Genesis (with Gemini acting as agent), and Genesis exercised discretion over how to deploy those assets to generate returns. In November 2022, Genesis halted withdrawals, locking roughly $900 million belonging to approximately 340,000 Earn investors. Genesis agreed to a $21 million civil penalty in February 2024. The charges against Gemini were eventually dismissed with prejudice following the 100% in-kind return of crypto assets to Earn investors through the Genesis bankruptcy process.
The Terraform Labs Collapse. On February 16, 2023, the SEC charged Terraform Labs Pte. Ltd. and its CEO Do Hyeong Kwon with multi-billion dollar securities fraud arising from the catastrophic collapse of the UST algorithmic stablecoin and its companion token LUNA. See SEC, SEC Charges Terraform and Do Kwon with Defrauding Investors in Crypto Schemes (2023.02.16). The SEC alleged that Terraform and Kwon marketed UST as a "yield-bearing" stablecoin offering up to 20% returns through the Anchor Protocol, while misrepresenting that a popular Korean mobile payment application used the Terra blockchain. The de-pegging of UST in May 2022 wiped out approximately $40 billion in market value virtually overnight. The litigation and its judicial treatment of the Howey test are discussed further below.
The Major Exchange Lawsuits: Binance and Coinbase. In two consecutive days in June 2023, the SEC filed sweeping enforcement actions against the world's two largest crypto exchanges. On June 5, the SEC charged Binance Holdings Limited, its U.S. affiliate BAM Trading Services, and CEO Changpeng Zhao with 13 charges encompassing operating unregistered exchanges, broker-dealers, and clearing agencies; the unregistered offer and sale of BNB tokens and the BUSD stablecoin as securities; operating an unregistered staking program and crypto lending program; and commingling customer assets with Zhao-controlled entities. See SEC, SEC Files 13 Charges Against Binance Entities and Founder Changpeng Zhao (2023.06.05). On June 6, the SEC charged Coinbase, Inc., the largest U.S.-based publicly traded exchange, with operating as an unregistered exchange, broker, and clearing agency, and with the unregistered offer and sale of securities through its staking-as-a-service program. The complaint identified 13 crypto assets traded on Coinbase as securities, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO. See SEC, SEC Charges Coinbase for Operating as an Unregistered Securities Exchange, Broker, and Clearing Agency (2023.06.06).
NFT Enforcement. The SEC extended its enforcement reach to non-fungible tokens in two separate actions in the summer and fall of 2023. In August 2023, Impact Theory, LLC, agreed to pay more than $6.1 million to settle charges that it had conducted an unregistered offering of crypto asset securities through the sale of its "Founder's Keys" NFTs. The SEC concluded the NFTs were investment contracts because purchasers were led to expect profits based on Impact Theory's efforts to develop its media business. See SEC, SEC Charges Impact Theory, LLC for Unregistered Offering of NFTs (2023.08.28). In September 2023, the SEC charged Stoner Cats 2, LLC — a project backed by actress Mila Kunis — with the unregistered offering of crypto asset securities through its "Stoner Cats" NFTs, which funded an animated web series. The SEC noted that approximately $8 million worth of Stoner Cats NFTs had been bought and sold in over 10,000 transactions on the secondary market. Stoner Cats agreed to pay a $1 million penalty and to establish a claims process. See SEC, SEC Charges Stoner Cats 2 LLC for Unregistered Offering of NFTs (2023.09.13).
Kraken Exchange Case. In November 2023, the SEC followed up on its earlier staking settlement by filing a broader action against Payward, Inc. (d/b/a "Kraken") for operating as an unregistered securities exchange, broker, dealer, and clearing agency, and for commingling customer funds. See SEC, SEC Charges Kraken for Operating as an Unregistered Securities Exchange, Broker, Dealer, and Clearing Agency (2023.11.20).
ConsenSys / MetaMask. In June 2024, the SEC filed suit against ConsenSys Software Inc., alleging that its MetaMask Swaps service operated as an unregistered broker and its MetaMask Staking service involved the unregistered offer and sale of securities. See SEC, SEC Charges ConsenSys Software for the Unregistered Offer and Sale of Securities and for Acting as an Unregistered Broker (2024.06.28).
Celsius and Alex Mashinsky. In July 2023, the SEC charged Celsius Network Limited and its CEO Alexander Mashinsky with securities fraud and the unregistered offer and sale of securities through Celsius's "Earn Interest Program." The SEC alleged that Mashinsky publicly claimed he was not selling CEL tokens while secretly selling large quantities, profiting approximately $48 million from artificially inflated prices. Celsius cooperated with the SEC and consented to relief. In a parallel criminal proceeding, Mashinsky pled guilty on December 3, 2024 to two counts of fraud, and on May 8, 2025, was sentenced to 12 years in federal prison — among the longest sentences for crypto-related fraud. See SEC, SEC Charges Celsius Network and Former CEO Alex Mashinsky with Fraud (2023.07.13).
Justin Sun and Tron. On March 22, 2023, the SEC charged Justin Sun, the Tron Foundation, BitTorrent Foundation, and Rainberry Inc. with the unregistered offer and sale of TRX and BTT as crypto asset securities, market manipulation through over 600,000 wash trades, and the unlawful touting of crypto assets by eight celebrity defendants — including Lindsay Lohan, Jake Paul, and Soulja Boy — who failed to disclose their compensation. See SEC, SEC Charges Justin Sun and His Companies for Fraud and Other Securities Law Violations (2023.03.22). The case was stayed in February 2025 and subsequently dismissed. The case generated particular controversy because Sun invested more than $75 million in crypto ventures linked to the incoming presidential administration in late 2024 and early 2025, leading Democratic members of Congress to allege potential conflicts of interest in the dismissal.
SEC v. DEBT Box: Enforcement Overreach Exposed. In a case that became a prominent cautionary tale about the limits of SEC enforcement, the SEC's suit against Digital Licensing Inc. (d/b/a "DEBT Box") collapsed in 2024 when Judge Robert Shelby of the District of Utah found that SEC attorneys had presented "materially false and misleading representations" to obtain a temporary restraining order — falsely stating that the defendants had closed their bank accounts and moved funds overseas. The court imposed sanctions of $1.8 million against the SEC ($1.05 million in attorney fees and $750,000 in receiver fees), and the SEC ultimately moved to dismiss its own case. See SEC v. Digital Licensing Inc., No. 2:23-cv-00482 (D. Utah). The DEBT Box debacle was widely cited by critics of the Gensler era as emblematic of an enforcement-first approach taken to excess.
Enforcement Statistics. According to data compiled by Cornerstone Research, SEC crypto enforcement peaked in 2023 with 46 actions (a 53% increase over 2022), generating approximately $281 million in monetary penalties. In fiscal year 2024, the number of actions declined to 33, but monetary penalties surged to approximately $4.68 billion — a 3,018% increase driven overwhelmingly by the $4.47 billion Terraform Labs settlement. In 2025, under the new leadership, actions fell dramatically to approximately 13, with monetary penalties of roughly $142 million — less than 3% of the prior year. Cumulatively from 2013 through 2024, the SEC brought 207 cryptocurrency-related enforcement actions (135 litigations and 72 administrative proceedings) imposing approximately $7.57 billion in monetary penalties. The Gensler administration alone (April 2021–December 2024) accounted for 125 actions and $6.05 billion in penalties — nearly four times the $1.52 billion imposed under Chair Clayton's entire tenure. See Cornerstone Research, SEC Cryptocurrency Enforcement: 2024 Update (2025.01).
The 2025 Policy Reversal
The change in presidential administration in January 2025 brought with it the most dramatic reversal in SEC enforcement policy in the agency's history. Within weeks of the new leadership taking office, the SEC began systematically dismissing the landmark enforcement actions that had defined the Gensler era, in most cases with prejudice and with no fines, no admissions of wrongdoing, and no changes to the defendants' business models.
The dismissals occurred in rapid succession:
Coinbase (Feb. 27, 2025): The SEC filed a joint stipulation for dismissal with prejudice. The SEC stated the dismissal was to "facilitate the Commission's ongoing efforts to reform and renew its regulatory approach to the crypto industry." See SEC, Litigation Release No. 26253 (2025.02.27).
Robinhood (Feb. 24, 2025): The SEC closed its investigation into Robinhood Crypto, LLC with no further action. Robinhood had previously disclosed receiving a Wells notice regarding its crypto operations.
Uniswap (Feb. 25, 2025): The SEC closed its investigation into Uniswap Labs. Uniswap had previously received a Wells notice in April 2024.
ConsenSys (Feb. 2025): The SEC dismissed its case against ConsenSys and MetaMask.
Immutable (Mar. 25, 2025): The SEC closed its investigation into Immutable with no further action.
Kraken (Mar. 27, 2025): The SEC filed a joint stipulation to dismiss the exchange case with prejudice. See SEC, Litigation Release No. 26278 (2025.03.27).
Crypto.com (Mar. 27, 2025): The SEC closed its investigation into Crypto.com.
Ripple (May-Aug. 2025): The SEC and Ripple reached a partial settlement reducing the civil penalty from $125 million to $50 million, but a federal judge refused to modify the existing injunction and reduce the penalty. Both the SEC and Ripple subsequently dismissed their pending appeals in the Second Circuit on August 7, 2025, effectively ending the five-year litigation with the original $125 million penalty intact. See SEC, Litigation Release No. 26369 (2025.08.07).
Binance (May 29, 2025): The SEC filed a joint stipulation for dismissal with prejudice. See SEC, Litigation Release No. 26316 (2025.05.29). (The separate DOJ criminal case against Binance, which resulted in a $4.3 billion settlement in November 2023 and Zhao's guilty plea for anti-money laundering violations, was unaffected by the SEC dismissal.)
Notably, the SEC's fraud case against Terraform Labs and Do Kwon — which had already resulted in a jury verdict and $4.5 billion settlement — was not dismissed, as it involved allegations of actual fraud and material misrepresentation rather than regulatory classification disputes.
The mass dismissals represent an extraordinary repudiation of the prior administration's enforcement approach. Whether characterized as a correction of prosecutorial overreach or a dangerous retreat from investor protection, the 2025 reversals made clear that the fundamental question of how federal securities law applies to digital assets — a question the SEC had, through enforcement, asserted sweeping answers to — remained profoundly unsettled.
Litigation
The enforcement actions described above produced several significant judicial opinions that will shape the application of the securities laws to digital assets for years to come.
SEC v. Ripple Labs
The SEC's December 2020 suit against Ripple Labs, Inc. — alleging the company's sales of XRP constituted unregistered securities offerings — was arguably the most consequential crypto case filed by the agency. On July 13, 2023, Judge Analisa Torres of the Southern District of New York issued a landmark summary judgment decision that drew a distinction no court had previously adopted in the crypto context: she held that Ripple's direct sales of XRP to institutional buyers constituted unregistered securities offerings under Howey, but that Ripple's "programmatic sales" of XRP — sales executed through blind trading algorithms on exchanges, where buyers did not know they were purchasing from Ripple — did not satisfy the Howey test. See SEC v. Ripple Labs, Inc., No. 20-cv-10832 (S.D.N.Y. 2023.07.13).
Judge Torres reasoned that programmatic buyers, unlike institutional investors, "did not know if their payments of money went to Ripple, or any other seller of XRP," and could not have had a reasonable expectation of profits derived from Ripple's efforts. The decision was celebrated by the crypto industry and widely criticized by SEC supporters. In August 2024, Judge Torres imposed a $125 million civil penalty on Ripple — substantially less than the roughly $2 billion the SEC had sought — and enjoined Ripple from future violations of the federal securities laws in connection with institutional sales. Both sides appealed to the Second Circuit, but as noted above, both appeals were dismissed in August 2025.
SEC v. Terraform Labs
The Terraform Labs case produced a direct judicial split with the Ripple decision — within the same courthouse. On July 31, 2023, Judge Jed S. Rakoff of the Southern District of New York denied Terraform's motion to dismiss and expressly rejected the programmatic/institutional sales distinction drawn by Judge Torres. See SEC v. Terraform Labs Pte. Ltd., No. 23-cv-01346 (S.D.N.Y. 2023.07.31). Judge Rakoff held that "Howey makes no such distinction between purchasers," and that whether a buyer acquired tokens directly from the issuer or through secondary market transactions "has no impact on whether a reasonable individual would objectively view the defendant" as promising profits based on their efforts.
On December 28, 2023, Judge Rakoff granted summary judgment for the SEC, finding "no genuine dispute" that the issuances of four crypto assets created by Terraform constituted securities. Following a nine-day jury trial in April 2024, the jury found Terraform and Kwon liable for securities fraud in less than two hours of deliberation. On June 12, 2024, Terraform and Kwon agreed to pay more than $4.5 billion in disgorgement, prejudgment interest, and civil penalties — the largest monetary settlement in SEC crypto enforcement history. See SEC, Terraform Labs and Do Kwon to Pay $4.5 Billion Following Fraud Trial (2024.06.12).
SEC v. Coinbase
On March 27, 2024, Judge Katherine Polk Failla of the Southern District of New York largely denied Coinbase's motion for judgment on the pleadings, ruling that the SEC had adequately alleged the crypto tokens traded on Coinbase were securities and that Coinbase operated as an unregistered exchange, broker, and clearing agency. See SEC v. Coinbase, Inc., No. 23-cv-04738, Doc. 105 (S.D.N.Y. 2024.03.27). Significantly, Judge Failla rejected Coinbase's invocation of the "major questions doctrine" — the argument, derived from West Virginia v. EPA and related Supreme Court precedent, that the SEC lacked authority to regulate the crypto industry absent an explicit congressional delegation. Judge Failla held that while "sizeable," the crypto industry "falls far short of being a 'portion of the American economy' bearing 'vast economic and political significance'" sufficient to trigger the doctrine, and that the SEC was acting within the regulatory authority Congress had long since delegated. The opinion was one of the most detailed judicial analyses of how crypto assets fit within the existing securities framework, addressing staking services, exchange operations, and the application of Howey to secondary market trading. It became moot when the SEC dismissed the case in February 2025.
SEC v. Binance
On June 28, 2024, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia issued a mixed ruling on the SEC's claims against Binance. See SEC v. Binance Holdings, Ltd., No. 1:23-cv-01599-ABJ-ZMF, Doc. 248 (D.D.C. 2024.06.28). Judge Jackson allowed certain claims to proceed — including those related to BNB's initial coin offering and direct sales, BNB Vault, staking services, and the failure to register as an exchange — but dismissed several others. Notably, she dismissed the SEC's claims regarding secondary market BNB sales (following Ripple's programmatic sales distinction), dismissed claims that the BUSD stablecoin was a security (reasoning that a stablecoin designed to maintain a constant value does not generate profit expectations under Howey), and dismissed claims regarding Binance's "Simple Earn" product. Judge Jackson also rejected the SEC's theory that a token is itself "the embodiment" of an investment contract, holding instead that the investment contract must be analyzed in the context of the transaction and surrounding circumstances. The remaining claims became moot when the case was dismissed with prejudice in May 2025.
SEC v. Jarkesy (U.S. Supreme Court)
Although not a crypto case, the Supreme Court's June 27, 2024 decision in SEC v. Jarkesy, 602 U.S. ___ (2024), has profound implications for all SEC enforcement, including in the crypto space. In a 6-3 decision, the Court held that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial in an Article III court. The decision effectively eliminated the SEC's long-standing practice of adjudicating fraud cases before its own in-house administrative law judges ("ALJs"), where the SEC historically enjoyed a significantly higher win rate than in federal court. For crypto defendants, Jarkesy means that any SEC enforcement action seeking civil penalties must now be brought in federal district court with the full protections of a jury trial — a significant procedural advantage that may make the SEC more selective in the cases it brings and more willing to settle.
Grayscale Investments v. SEC
On August 29, 2023, the U.S. Court of Appeals for the D.C. Circuit ruled that the SEC had acted "arbitrarily and capriciously" in disapproving Grayscale's application to convert its Bitcoin Trust into an exchange-traded product while having previously approved exchange-traded products holding Bitcoin futures. See Grayscale Investments, LLC v. SEC, No. 22-1142 (D.C. Cir. 2023.08.29). Writing for the panel, Judge Rao found that the SEC had failed to provide "a reasonable and coherent explanation" for treating the two functionally similar products differently, since both Bitcoin spot and futures prices were derived from the same underlying asset and the listing exchanges had identical surveillance-sharing agreements. The court vacated the SEC's disapproval order and remanded for further proceedings. The SEC declined to seek rehearing, and the decision paved the way for the subsequent approval of spot Bitcoin ETFs in January 2024.
Exchange-Traded Products
The SEC's history with crypto exchange-traded products had long been one of rejection. From 2017 through early 2023, the SEC disapproved every application for a spot Bitcoin exchange-traded product, including multiple proposals from Grayscale, Fidelity, Bitwise, VanEck, and others, finding in each instance that the applicants had not met the burden of demonstrating that the underlying market was resistant to fraud and manipulation. The D.C. Circuit's Grayscale decision disrupted that pattern.
Spot Bitcoin ETFs
On January 10, 2024, the SEC approved the listing and trading of 11 spot Bitcoin exchange-traded products, including those sponsored by BlackRock (iShares Bitcoin Trust), Fidelity (Wise Origin Bitcoin Fund), Bitwise, VanEck, ARK 21Shares, Invesco Galaxy, Franklin Templeton, WisdomTree, Valkyrie, Hashdex, and the existing Grayscale Bitcoin Trust conversion. See SEC, Statement on the Approval of Spot Bitcoin Exchange-Traded Products (2024.01.10). In his statement accompanying the approval, Chairman Gensler took pains to note that the approval was narrowly based on the change in circumstances compelled by the D.C. Circuit's Grayscale decision, cautioned that "Bitcoin is primarily a speculative, volatile asset," and emphasized that the approval "should in no way signal the Commission's willingness to approve listing standards for crypto asset securities." Id. Within their first month of trading, the spot Bitcoin ETFs attracted over $4 billion in net inflows, making them among the most successful ETF launches in history.
Spot Ethereum ETFs
On May 23, 2024, the SEC approved rule changes (Form 19b-4 filings) permitting the listing and trading of eight spot Ether exchange-traded products, a decision that surprised many market observers given Gensler's prior suggestions that Ethereum might qualify as a security after its transition to proof-of-stake. On July 22, 2024, the SEC declared the registration statements (Form S-1 filings) effective, and trading began on July 23, 2024. The approved products included ETFs from Grayscale, BlackRock (iShares), Fidelity, Bitwise, VanEck, ARK 21Shares, Invesco Galaxy, and Franklin Templeton. A notable condition of approval was that the ETFs were prohibited from staking the underlying ETH holdings — effectively conceding, or at least deferring, the question of whether staking constitutes a securities offering.
Subsequent ETF Developments
Under the Atkins SEC, the pace of crypto ETF innovation accelerated considerably. In July 2025, the SEC approved in-kind creation and redemption mechanisms for Bitcoin and Ethereum ETFs, replacing the original cash-only creation/redemption requirement that had been imposed by the Gensler SEC. SEC, SEC Permits In-Kind Creations and Redemptions for Crypto ETPs (2025.07.29). In-kind mechanisms are standard for traditional ETFs and improve tax efficiency and tracking precision for investors. In September 2025, the SEC adopted generic listing standards for crypto exchange-traded products, streamlining the approval process for future filings and eliminating the need for individual rule change applications for products meeting specified criteria.
Most significantly, the SEC in the second half of 2025 approved spot ETFs for additional crypto assets beyond Bitcoin and Ethereum, including products tracking Solana (SOL), XRP, Chainlink (LINK), and HBAR. These approvals represented a dramatic expansion of the SEC's comfort with crypto exchange-traded products and implicitly acknowledged — by approving ETF products holding these tokens — that the SEC no longer maintained these assets were unregistered securities requiring enforcement action.
Proposed Rules
Despite years of aggressive enforcement, the SEC under Chairman Gensler did not propose any rules directly targeted at crypto firms. It did, however, propose three rules of general application with significant crypto implications, all of which were subsequently either withdrawn or vacated under the Atkins SEC. The first was a proposed change to the definition of an "exchange" that caused a significant amount of alarm among crypto firms and enthusiasts alike. See SEC, Proposed Rule, Amendments to Exchange Act Rule 3b-16 Regarding the Definition of “Exchange”; Regulation ATS for ATSs That Trade U.S. Government Securities, NMS Stocks, and Other Securities; Regulation SCI for ATSs That Trade U.S. Treasury Securities and Agency Securities (2022.01.26) (comments due 30 days after publication in Federal Register; published on 2022.03.18).
More specifically, the SEC proposed to reinterpret the existing definition of "exchange" in the Exchange Act — since the SEC cannot unilaterally amend the Act itself — in a way that would expand an exchange to include not just platforms that match buyers and sellers of securities based on specific, firm orders, but would “include systems that offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.” Id. at 1. Thus, the change could potentially encompass many businesses in the crypto space (particularly those that develop/deploy/make available automatic-market making protocols) and require them to register as an Alternative Trading System of securities under Regulation ATS. See, e.g., Gabriel Shapiro, Urgent Considerations of Impact on Blockchain/DeFi of the SEC’s Proposed Regulation ATS Amendment (2022.01.27). Read as broadly as currently worded, it could even potentially encompass completely unrelated businesses that provide a forum for people interested in discussing digital assets that result in negotiations of securities trades (e.g., Reddit, Telegram, Discord).
The changed definition would mark a dramatic broadening of the SEC’s regulatory ambit, so much so that Commissioner Hester Peirce issued a dissenting statement simultaneously with the rule’s proposal. See Hester M. Peirce, Dissenting Statement on the Proposal to Amend Regulation ATS (2022.01.26). According to Peirce, the proposal is so broad that “those who operate any service that is designed to facilitate any communication between potential buyers and sellers of any type of security” should immediately read the release because “[e]ven if you have nothing to do with government securities or even fixed-income, or with traditional securities, . . . . [the release] covers a lot of ground, and you should not assume that it has nothing to do with you, because it probably does.”
Although published in the Federal Register only on March 18, 2022 (and thus triggering the 30-day deadline for public comments), the proposal has already received dozens of comments opposed to the rule (and the short period for comments), including by crypto trade groups and businesses, law firms, think tanks, and private individuals. The rule was formally withdrawn under the new SEC leadership as part of a broader regulatory reset announced in the spring of 2025.
The second rule that drew scrutiny from the crypto industry was one that would expand the definition of "dealer" in the Exchange Act in a way that would largely eliminate the distinction between a "dealer" and "trader." See SEC, Proposed Rule, Further Definition of “As a Part of a Regular Business” in the Definition of Dealer and Government Securities Dealer, 87 Fed. Reg. 23054 (2022.04.18) (comments closed 2022.05.27). The proposed rule focuses on making traders who provide significant liquidity to the market, who are currently not required to register with the SEC, do so. The result is that the rule could encompass liquidity providers in decentralized finance protocols, i.e., automated market makers or AMMs, to have to register as securities dealers, since the proposal is not limited to particular asset classes or markets. The only reference in the lengthy proposal, however, appears in footnote 36, which states that the proposed rule "would apply to government securities as defined by . . . the Exchange Act, including any digital asset that is a security or a government security within the meaning of the Exchange Act." Id.
How exactly a decentralized protocol could register as a dealer is not covered by the rule, nor the precise scope of the rule as applied to digital assets. Is it only "government securities"—the first part of the phrase about its application—which would seem to cover few if any digital assets, or would the SEC interpret the rule truly to mean "any digital asset that is a security"? This ambiguity, along with the risk of punishing penalties (including criminal penalties) for violations of the provision have caused some to suggest enactment of the rule could undermine investment in this emergent technology. See, e.g., Cheyenne Ligon, The SEC's New Proposal to Redefine 'Dealer' Could Spell Bad News for DeFi, CoinDesk.com (2022.03.28).
The dealer rule was finalized in February 2024, though the crypto industry immediately challenged it. See SEC, Final Rule, Further Definition of "As a Part of a Regular Business" in the Definition of Dealer and Government Securities Dealer (2024.02.06). In June 2024, the U.S. Court of Appeals for the Fifth Circuit vacated the rule in National Association of Private Fund Managers v. SEC, 103 F.4th 1097 (5th Cir. 2024), finding that the SEC had exceeded its statutory authority. The Atkins SEC subsequently declined to appeal the decision, effectively abandoning the rule.
A third proposal that drew significant attention from the crypto industry was the "Safeguarding Advisory Client Assets" proposal, which would have expanded the existing custody rule (Rule 206(4)-2 under the Investment Advisers Act) to cover a broader range of assets — including crypto assets — and imposed enhanced custody requirements on investment advisers. See SEC, Proposed Rule, Safeguarding Advisory Client Assets (2023.02.15). The proposal was controversial because it would have required crypto assets to be held by a "qualified custodian," a term the industry argued was not clearly defined for digital assets, and because the rule's broad scope could encompass smart contract-based assets that do not easily fit traditional custody paradigms. The safeguarding rule was withdrawn by the Atkins SEC, which indicated it would pursue a different approach to crypto custody through the Crypto Task Force's rulemaking process.
In sum, by early 2026, all three of the major Gensler-era proposed rules with significant crypto implications — the ATS/exchange definition rule, the dealer rule, and the safeguarding/custody rule — had been either withdrawn or vacated. Whether the Atkins SEC's promised "Regulation Crypto" rulemaking will fill the resulting regulatory gap remains to be seen.
Index of Sources
Sources are listed in reverse chronological order.
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Reves v. Ernst & Young, 494 U.S. 56 (1990)
SEC v. Howey Co., 328 U.S. 293 (1946)
Authors
This article was originally drafted by @Lawtoshi and is subsequently being updated in conjunction with Claude Code.
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