The US Securities and Exchange Commission (SEC) Retreats from Crypto Litigation
The US Securities and Exchange Commission (SEC) is undertaking a full-scale retreat from much of the major crypto litigation started under former Chair Gary Gensler, but not everyone is off the hook.
At least four lawsuits against crypto companies – Ripple, Kraken, Cumberland DRW, and Pulsechain – remain ongoing, and probes into another three firms – Unicoin, Crypto.com, and Immutable – have not yet been closed.
SEC Commissioner Hester Peirce, the leader of the agency’s newly-created Crypto Task Force, has already made good on her promise earlier this month to "disentangle" the SEC from various crypto-related litigation. The agency has agreed to drop its cases against Coinbase and ConsenSys, pending commissioner approval, and has put its cases against Binance and Tron on pause as the parties consider a "potential resolution."
The Open Suits
Though the SEC has retreated from its accusations that Coinbase operated as an unregistered securities broker and exchange, similar charges against Kraken have not yet been dropped. The SEC sued Kraken in November 2023, accusing the firm of commingling customer and corporate funds while operating as an unregistered securities broker, clearing agency, and dealer. A representative for Kraken did not respond to CoinDesk’s request for comment.
Similarly, the SEC sued Cumberland DRW, the crypto trading arm of Chicago-based trading firm DRW, last year for allegedly operating as an unregistered securities dealer. Don Wilson, the founder of DRW, pledged to fight the suit at the time. A representative for DRW declined to comment, telling CoinDesk the firm currently has no updates to share.
The Open Probes
Several of the SEC’s probes – investigations that have not yet led to filed charges – into crypto companies also remain open.
Crypto.com, an Australian blockchain gaming and NFT company, sued the SEC last October after it received a Wells notice. The firm voluntarily dropped its suit two months later, shortly after CEO Kris Marzalek met with then-President Elect Donald Trump. Crypto.com did not respond to CoinDesk’s request for comment.
Australian blockchain gaming and NFT company Immutable also received a Wells notice last year connected to the sale of its IMX token in 2021, and pledged to fight any ensuing enforcement charges. Neither the company nor the SEC has made any public statements about the status of the probe.
Unicoin, a company that received a Wells notice last year informing it that the SEC planned to bring charges alleging violations related to fraud, deceptive practices, and the offer and sale of unregistered securities, did not respond to CoinDesk’s request for comment.
Looking Forward
The SEC’s retreat, as well as the slashing of its crypto enforcement team, according to Fike, is an indication that the agency is moving away from the so-called "regulation by enforcement" approach to the crypto industry undertaken by former Chair Gensler.
"I think the SEC is signaling through staffing that it means what it is now saying: that crypto regulation will come through statements and potential future rulemaking, not case-by-case enforcement actions," Fike said. "Their hope, and mine, is that a backing away from calling all crypto securities and assessing the crypto industry as a whole under Commissioner Peirce’s new taskforce, will create some clarity around crypto regulation."
FAQs
Q: What is the current status of the SEC’s crypto-related litigation?
A: The SEC is withdrawing from much of the major crypto litigation started under former Chair Gary Gensler, with at least four lawsuits against crypto companies remaining ongoing, and probes into another three firms not yet closed.
Q: Which companies have had their cases dropped by the SEC?
A: Coinbase and ConsenSys, pending commissioner approval, and Binance and Tron, with a potential resolution being considered.
Q: What is the current status of the SEC’s probes into crypto companies?
A: Several probes are ongoing, including those into Crypto.com, Immutable, and Unicoin.
Q: What does the SEC’s retreat from crypto regulation mean for the industry?
A: The SEC is moving away from the "regulation by enforcement" approach and is focusing on creating a better regulatory structure for the crypto industry through statements and potential future rulemaking.
