On May 21, 2025, the SEC once again brought cryptocurrency regulation into the spotlight. Unicoin was accused of raising over $100 million through false statements, claiming its tokens were backed by billions of dollars in assets, while their actual value was far below expectations.
Over the past decade, the SEC's regulation of the cryptocurrency industry has gone through significant ups and downs, from cracking down on fraudulent ICOs to comprehensive enforcement actions against major exchanges. After the appointment of a pro-crypto chairman, regulation had noticeably eased, with several old cases being dropped. However, with new lawsuits emerging, is strong regulation making a comeback?
The SEC's "Regulatory Storm"
Since the SEC first took enforcement action against cryptocurrencies in 2013, the crypto industry has remained a "gray area" in regulation. The SEC's core regulatory tool is the Howey Test from 1946, used to determine whether an asset is a security, which involves "investment of money, a common enterprise, and the expectation of profits from the efforts of others." This standard is clear in traditional finance but has sparked much controversy in the complex environments of DeFi and token economies. For a long time, the SEC relied on sporadic enforcement actions rather than clear rules to regulate the digital asset industry, leading to a lack of predictability in the market and compliance dilemmas for investors and businesses.
In the early days of cryptocurrency, initial coin offerings (ICOs) surged, but many projects were suspected of fraud. In 2017, the SEC released the "DAO Report," clearly stating that tokens could be considered securities, marking the formal intervention of regulation. In December of the same year, the SEC filed a lawsuit against PlexCorps, accusing it of raising $15 million through false advertising, initiating a crackdown on fraudulent ICOs. In 2018, the BitConnect case became a focal point, as the platform raised over $2 billion through a Ponzi scheme-like investment plan, falsely promising high returns, and was ultimately ordered to pay hefty fines in 2021. A common feature of these early cases was that project parties deceived investors through false statements or misappropriation of funds, with the SEC's enforcement goal being to protect investors from the "wild growth" of the crypto market.
In 2021, after Gary Gensler took office as SEC chairman, the crypto industry faced a "regulatory storm." Gensler argued that "enforcement is regulation," believing that the vast majority of crypto assets are securities and must comply with federal securities laws. In June 2023, the SEC launched significant lawsuits against Binance and Coinbase, accusing both of operating as unregistered securities exchanges involving dozens of tokens such as BNB, SOL, and ADA.
Binance was accused of illegally selling securities and manipulating the market, while Coinbase was charged with providing unregistered brokerage and clearing services. These lawsuits not only intimidated the market but also led to a drop in the prices of related tokens by 5.2% to 17.2%. During the same period, the Ripple case, which began in 2020, became a benchmark for the industry, with the SEC accusing Ripple of raising $1.3 billion through unregistered sales of XRP. In 2023, the court ruled that XRP's trading in the secondary market is not necessarily a security, but programmatic sales still constitute a violation, highlighting the complexity of regulatory definitions. The Terraform Labs case in 2022 further exposed market risks, with the SEC accusing its founder Do Kwon of manipulating the market through TerraUSD and LUNA, resulting in billions of dollars in losses for investors.
These cases reflect Gensler's tough stance during his tenure, drawing regulatory lines through high-profile lawsuits in an attempt to bring the crypto industry into the traditional financial framework. However, Gensler's enforcement was based on the Securities Act of 1933, attempting to forcibly fit new digital assets into a traditional framework, lacking adaptability and clarity.
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A Shift to Crypto-Friendly Regulation
Since Trump returned to the White House, he has prominently made "crypto-friendly" one of his key political declarations. On April 10, 2025, the SEC under Trump welcomed new chairman Paul Atkins, who brought a significant change in regulatory direction. Known for his pro-market stance, Atkins emphasized regulating the crypto industry through clear rules rather than mere enforcement. In February 2025, the SEC dropped civil lawsuits against Ripple, Coinbase, and Kraken, ending Gensler's hallmark cases.
Additionally, the SEC abolished Staff Accounting Bulletin 121 (SAB 121), restoring the custody of crypto assets as off-balance-sheet items and clarifying that self-mining and mining pool activities generally do not constitute securities. These measures are seen as a "de-bonding" of the crypto industry, aimed at reducing compliance burdens on businesses and stimulating innovation. The SEC's previous "patchwork enforcement" lacked user-friendliness and failed to provide a predictable compliance path, while Atkins' initiatives aim to change this situation.
More importantly, Atkins pushed for the establishment of a crypto task force, led by SEC Commissioner Hester Peirce, aimed at collaborating with the industry to develop clear rules covering stablecoins, meme coins, and DeFi. Peirce announced on February 21 that she invited the public to provide feedback on crypto assets and blockchain technology, posing over 100 questions covering four major categories, including securities crypto assets, tokens in investment contracts, tokenized securities, and non-security crypto assets.
The efforts of this task force are not limited to the SEC but also resonate with the digital asset executive order signed by Trump on January 23, which established a cross-agency digital asset working group involving the SEC, Commodity Futures Trading Commission (CFTC), and other agencies. This cross-agency collaboration aims to address the long-standing issue of regulatory overlap that has plagued the industry, such as the SEC considering tokens as securities, the CFTC viewing them as commodities, and the Consumer Financial Protection Bureau (CFPB) treating them as "funds" under the Electronic Fund Transfer Act. Atkins' pro-market stance and the establishment of the task force are seen as a new dawn for the industry, signaling a shift from "punitive regulation" to "guiding regulation."
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Why Are There New Lawsuits Again?
Despite Atkins' dismissal of several lawsuits after taking office, multiple cases this year have sparked speculation about whether regulation is tightening. These cases include the Unicoin case, Nova Labs case, crypto executive fraud cases, and the Coinbase user data investigation. Why is the SEC still frequently filing lawsuits in the context of relaxed policies? The answer lies in the regulatory bottom line, the complexity of the industry, and the transitional period of rule-making.
The Unicoin case may be a significant landmark case in 2025. The SEC accused Unicoin and its executives of raising over $100 million through false statements, claiming their tokens were backed by billions of dollars in assets, while their actual value was far below expectations, misleading over 5,000 investors. Additionally, the company was accused of selling 37.9 million unregistered rights certificates. Fraud remains the SEC's regulatory bottom line, highly consistent with its core mission to protect investors. Even if enforcement intensity weakens, the SEC will still focus on fraud and Ponzi schemes, especially in protecting retail investors.
The controversy over unregistered securities offerings has not yet reached a clear conclusion. The allegations in the Unicoin case are not limited to fraud but also involve the sale of unregistered securities. Although Atkins is promoting rule-making, the applicability of the Howey Test has not been fully clarified. During Gensler's tenure, there was an attempt to classify all tokens as securities, while the new task force is trying to distinguish between different types of crypto assets, such as securities tokens and non-securities tokens. This precise regulation makes the cases in 2025 more focused on specific violations rather than broadly challenging the legality of exchanges or tokens.
Furthermore, the SEC's requirements for data transparency are escalating. On May 15, the SEC launched an investigation into Coinbase, questioning its exaggeration of the number of "verified users" in its IPO documents, which may mislead investors. The Coinbase case was previously divided into two tracks: the SEC accused its trading platform of illegally operating as an unregistered securities exchange, while Coinbase proactively filed a lawsuit demanding the SEC establish clear rules. In early 2025, the Third Circuit Court ruled that the SEC's reasons for rejecting Coinbase's request for rule-making were insufficient, ordering it to provide further explanation. Subsequently, the SEC withdrew its lawsuit in the Second Circuit, indicating a shift in regulatory focus. This case marks a transition for the SEC from merely focusing on the definition of securities to a broader compliance review, particularly in financial disclosures.
The complexity of the crypto industry and the lag in regulation are deep-rooted reasons for the new lawsuits. From DeFi to NFTs to asset-backed tokens, the rapid development of the market has made it difficult for the regulatory framework to keep pace. Emerging models like asset-backed tokens involved in the Unicoin case have forced the SEC to test regulatory boundaries through enforcement. The "turf wars" between the SEC, CFTC, and CFPB have exacerbated regulatory uncertainty, while Atkins' task force and the cross-agency working group are attempting to address this issue. Nevertheless, the rule-making process takes time, and in the short term, lawsuits remain the primary tool to fill regulatory gaps.
Is Crypto Regulation About to "Reverse" Again?
The new lawsuits in 2025 show significant differences in targets, scope, and impact compared to the past decade, reflecting the evolution of the SEC's regulatory strategy. First, the enforcement targets are more focused. During Gensler's tenure, the SEC attempted to classify most crypto assets as securities through lawsuits against leading companies like Binance and Coinbase, identifying 68 tokens as securities, which caused widespread market turmoil. In contrast, the new lawsuits in 2025 focus more on specific violations, such as the fraud and unregistered sales by Unicoin, avoiding attacks on the entire ecosystem and indicating that the SEC is more inclined to target "bad actors." The enforcement during Gensler's time was based on the outdated Securities Act of 1933, lacking adaptability, while the new task force aims to establish "fair rules" suitable for digital assets.
Second, the scope of the lawsuits is more precise. Historical cases like Ripple and Binance involved billions of dollars in transactions and multiple tokens, affecting the entire market. The Unicoin case involves $100 million, the settlement amount for the Nova Labs case is only $200,000, and the Coinbase investigation is limited to data disclosure issues, not touching on its core business. The scale and impact of the new cases are more limited, avoiding severe market fluctuations.
Additionally, the regulatory tone is more moderate. Lawsuits during Gensler's tenure were often accompanied by strong statements, such as "almost all crypto assets are securities," which provoked a strong backlash from the industry. Under Atkins' leadership, the SEC focuses more on collaboration with the industry, as evidenced by the repeal of SAB 121 and the establishment of the crypto task force, showing support for innovation. The language in the new lawsuits focuses on specific violations rather than denying the entire industry, reflecting a more gentle regulatory stance. Hester Peirce's public solicitation for opinions is "quite unusual," indicating the SEC's emphasis on industry collaboration.
Finally, legal disputes have decreased. In the Ripple case, the court made a split ruling on the securities nature of XRP, highlighting the limitations of the Howey Test. In contrast, new lawsuits like the Unicoin case are primarily based on fraud and unregistered sales, resulting in fewer legal disputes and avoiding the complexities of defining token attributes. This precise enforcement helps reduce uncertainty in the industry. With the introduction of clear rules, there may be more private securities lawsuits and class actions in the future, while the SEC's enforcement resources will focus more on traditional fraud and Ponzi schemes.
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