The SEC Is Abandoning Its Biggest Crypto Lawsuits

The US Securities and Exchange Commission (SEC) is backing away, one-by-one, from the volley of lawsuits and investigations it brought against cryptocurrency businesses under the Joe Biden administration, in a reversal described by a former attorney at the regulatory agency as “unprecedented.”

In the weeks since Trump returned to the White House, the SEC has wasted no time in overhauling its crypto division. The day after the inauguration, the agency established a “crypto task force” responsible for developing a “comprehensive and clear regulatory framework for crypto assets.” Then, the SEC rebranded its crypto investigations branch into a smaller-scale “cyber and emerging technology unit.”

On February 13, a federal judge granted a joint request by the SEC and Binance, the world’s largest crypto exchange, to pause their ongoing litigation while they await new rules from the crypto task force. The SEC petitioned for a similar pause on Wednesday in a separate case against Justin Sun, the Chinese crypto entrepreneur who recently announced he had invested $75 million in a crypto project with ties to the Trump family.

In the last week alone, the SEC agreed to drop its lawsuit against crypto exchange Coinbase outright, while trading platforms Robinhood and Uniswap, non-fungible token marketplace OpenSea, and crypto software company Consensys all celebrated the apparent end of SEC investigations into their respective crypto activities.

The recalibration of the SEC’s previously adversarial stance towards crypto is meant to afford companies the “freedom to experiment and build interesting things,” said SEC commissioner Hester Peirce in a recent statement, whilst still shielding investors from fraud. But others have interpreted the pivot as a signal that the crypto industry will be subject to a far-reduced level of scrutiny.

“The dismantling of the SEC enforcement program is mammoth. The radical turnabout that the SEC has undertaken in the last month is truly unbelievable,” says John Stark, who served for 18 years as an attorney at the SEC. “Ultimately, the [SEC’s lawsuits against crypto firms] are all going to be gone, gone, gone.”

The SEC did not respond to an interview request or a request for comment relating to this story.

The New Crypto Gameplan

During the Biden presidency, the SEC was a thorn in the side of crypto businesses, which it repeatedly asserted had violated US securities laws by failing to register with the agency. It was near-impossible to do business in the US, Coinbase told WIRED in 2023, with the constant fear of litigation hanging overhead and without any crypto-specific rules to follow.

In response to what crypto businesses considered outright hostility from the SEC under Biden, the industry embarked on a colossal lobbying effort in the leadup to the 2024 election. Crypto companies and their executives funnelled more than $150 million into three super political action committees—Fairshake, Protect Progress, and Defend American Jobs—set up to support pro-crypto congressional candidates. Meanwhile, high-profile crypto figures—among them Cameron and Tyler Winklevoss, cofounders of crypto platform Gemini, and Marc Andreessen and Ben Horowitz, venture capitalists heavily invested in crypto startups—came out in support of Trump. The strategy apparently worked.

In July, on the campaign trail, Donald Trump promised a crowd of bitcoiners that he would fire previous SEC chair Gary Gensler if reelected. “I didn’t know he was that unpopular,” said Trump, referring to the crowd’s rapturous response to the pledge. In November, after Trump won the election, the crypto industry got to help handpick the nominee to replace Gensler, landing on Paul Atkins, a former SEC commissioner who has expressed the view that crypto businesses have been treated unfairly in the US. (Atkins remains sidelined for now, pending confirmation.)

The argument advanced by the crypto industry—that it was subjected to wrongful lawsuits by a politically-motivated regulator—is likely to have struck a chord with Trump, says Anthony Scaramucci, founder of crypto-focused investment firm SkyBridge Capital and former communications director for Trump. “Trump is a big believer in lawfare,” says Scaramucci. “If you go to Trump saying you’re a victim of lawfare…he’s going to side with that.”

According to Stand With Crypto, a nonprofit pushing for bespoke crypto regulation in the US, more than 250 pro-crypto representatives were elected to Congress in 2024. The crypto industry claimed high-profile scalps in races in which it had invested most heavily: In Ohio, incumbent Democratic senator Sherrod Brown, depicted as an arch-villain in crypto circles, was unseated by Republican Bernie Moreno. Through Defend American Jobs, the crypto industry spent more than $40 million in support of Moreno.

Having witnessed the efficacy of the crypto lobbying machine, politicians concerned about the security of their own seats are potentially less likely to voice opposition to the industry in future, claims Scaramucci, which in turn increases the chances of crypto-specific regulation falling into place and crypto-focused legislation making it into law.

“The Democrats have gotten the life scared out of ‘em,” claims Scaramucci. “You have to have regulatory clarity. With the Trump administration, you’ll get that. You’ve got enough Democrats scared that will side with [Republicans] to create that.”

A Double-Edged Sword

The SEC’s retreat from its outstanding lawsuits against crypto businesses will be received as an early signal of the agency’s intent to work arm-in-arm with the industry to come up with a set of rules to govern crypto transactions and products.

That rulebook will clear up the question at the heart of the lawsuits: Which crypto assets should be classified as securities, the specific type of investment product over which the SEC has jurisdiction, and in what context?

“I think the industry sees regulators willing to work across the table from them,” says Coy Garrison, a former SEC attorney and partner at law firm Steptoe. “That’s the difference. Four years ago, the other side of the table was just the enforcement arm.”

But it’s a mistake to interpret the SEC’s withdrawal from the crypto-related cases as a total loosening of the leash, claims Garrison. “Sometimes, it’s easy for people to only see the top line,” he says. “The SEC is still going to be policing potential fraudulent activity within its jurisdiction relating to crypto.”

It is unlikely that the SEC’s new stance towards crypto will trigger an immediate proliferation of new crypto products and services in the US. But once the crypto task force has set out its rules, crypto companies will feel emboldened to enter new corners of the US market, sources say.

“The creativity of the crypto industry knows no bounds,” says Stark. “From retirement money to 529s, exchange-traded funds, asset-backed securities, and derivatives. Expect crypto to infiltrate everywhere. Why not?”

Meanwhile, assets like memecoins, a class of crypto coin that typically has no strict purpose but to act as a vehicle for financial speculation, are likely to go unregulated by the SEC. A few days prior to his inauguration, Trump himself launched a memecoin, which was roundly criticized—including by members of the crypto industry—as an alleged money grab and a potential vector for bribery.

In recent lawsuits brought against memecoin platforms and promoters, complainants sought to argue that memecoins meet the definition of a security in certain conditions and should therefore be subject to securities laws. But on Thursday, the SEC put out a statement outlining the view that memecoins do not fall within its jurisdiction.

“The likelihood of the SEC conducting an investigation into a memecoin is slim to none—and slim just left town,” claims Stark.

The obvious benefits for crypto businesses associated with the changes at the SEC must be weighed against the potential reputational downsides that come with the unwillingness of the new-look agency to police the most unserious and grift-heavy corners of the sector.

Similarly, the warmth shown towards the industry by the White House comes with a caveat: Trump himself appears intent to share in the financial upside through crypto endeavors of his own, which some have argued will heap scorn onto the industry and undermine its search for legitimacy.

“With Donald Trump, you get the entire buffet table. There’s no à la carte,” says Scaramucci. “You start with the grifting and self-dealing,” he alleges. “Then you’re getting some pro-crypto ideas and regulation. You’ve got to eat everything.”