SEC Retreats from Major Crypto Litigation

The U.S. Securities and Exchange Commission (SEC) is reducing its involvement in major crypto litigation initiated under former Chair Gary Gensler, although some lawsuits remain active.

Ongoing Lawsuits

Currently, four lawsuits against crypto firms — Ripple, Kraken, Cumberland DRW, and Pulsechain — are ongoing, while investigations into Unicoin, Crypto.com, and Immutable are still open.

SEC Commissioner Hester Peirce, head of the new Crypto Task Force, has initiated steps to “disentangle” the SEC from crypto-related litigation, including plans to drop cases against Coinbase and ConsenSys. Cases against Binance and Tron are paused as they explore possible resolutions.

Coinbase Chief Legal Officer Paul Grewal commented on this unprecedented change, highlighting its significance after four tumultuous years of regulation.

Recent Case Closures

In the past two weeks, the SEC has informed several companies—previously under investigation—that they will not face enforcement charges. These firms include Robinhood Crypto, Uniswap, OpenSea, and Gemini.

Details on Open Suits

Despite the SEC backing off allegations against Coinbase, charges against Kraken still stand. Kraken was accused in November 2023 of mishandling customer and corporate funds while acting as an unregistered broker.

Additionally, the SEC has a pending case against Cumberland DRW and has appealed a ruling involving Ripple, where a judge declared that XRP was not a security when sold to retail investors.

Status of Probes

Several SEC investigations remain unresolved. After initially suing, Crypto.com withdrew its lawsuit following a meeting with a political figure. The statuses of investigations into Immutable and Unicoin remain unclear following Wells notices received last year.

Future of Crypto Regulation

The SEC’s retreat signals a shift away from the “regulation by enforcement” approach, as voiced by Rebecca Fike, a former SEC enforcement attorney. She emphasized the agency’s intent to create clearer future regulations rather than pursuing case-by-case enforcement.

While there are signs of progress, not all parties are satisfied. Cameron Winkelvoss, president of Gemini, has called for compensation for legal expenses due to the investigation, but this request is unlikely to be met.

Fike remarked that the SEC’s initial attempts to regulate the evolving crypto market were well-intentioned, aiming to protect investors amid potential fraud risks in a rapidly developing space. The goal moving forward is to establish a coherent regulatory framework for crypto and digital assets.