SEC Abandons Enforcement-Only Approach to Crypto Regulation
The SEC's stance on crypto has shifted significantly over the past five years. During Gary Gensler's tenure as chair, the agency took a 'enforcement instead of legislation' approach to regulating the industry.
The SEC used the Howey test established by the Supreme Court in 1946 to classify many tokens as securities, leading to lawsuits against major platforms like Coinbase, Binance, and Kraken, as well as issuing Wells notices to Uniswap, OpenSea, and Robinhood.
However, a significant defeat for the SEC came in July 2023 when Judge Analisa Torres ruled in the Ripple case that XRP's programmatic sales in the secondary market do not constitute a securities offering. In August 2024, the court fined Ripple approximately $125 million.
After Trump took office in January 2025, the SEC rescinded Accounting Bulletin No. 121, which restricted banks from custodying crypto assets, established a crypto working group, and gradually dismissed lawsuits against Coinbase, Kraken, and Binance between February and May.