SEC Pulls Back from Crypto Litigation
The U.S. Securities and Exchange Commission (SEC) is withdrawing from various major crypto lawsuits initiated under former Chair Gary Gensler’s tenure. However, not all entities are in the clear. At least four lawsuits against crypto companies — Ripple, Kraken, Cumberland DRW, and Pulsechain — continue, while investigations into three other firms — Unicoin, Crypto.com, and Immutable — remain open.
Progress So Far
SEC Commissioner Hester Peirce, who leads the newly-established Crypto Task Force, has already begun to “disentangle” the SEC from crypto-related litigation. The SEC has agreed to dismiss its cases against Coinbase and ConsenSys, pending commissioner approval, and it has paused its cases against Binance and Tron as they discuss a “potential resolution.”
Impact on the Crypto Industry
This unprecedented activity at the SEC demonstrates “just how beyond the pale the last four years were,” according to Coinbase Chief Legal Officer Paul Grewal. Many companies that previously received Wells notices from the regulator received word from the SEC that their investigations had been closed and that no enforcement charges would be filed against them, including Robinhood Crypto, Uniswap, OpenSea, and Gemini.
Current Active Lawsuits
Although the SEC has withdrawn its allegations against Coinbase for operating unregistered securities, similar charges against Kraken have not yet been dismissed. Other ongoing cases include those against Cumberland DRW, Ripple, and Pulsechain, PulseX, and Hex.
Continuing Investigations
Several SEC probes into crypto companies remain open. Crypto.com, Immutable, and Unicoin all received Wells notices last year and continue to be under investigation.
Looking Forward
The SEC’s retreat, along with the downsizing of its crypto enforcement team, suggests a shift away from “regulation by enforcement” in the crypto industry towards a more policy-based approach. The hope is that this change will provide more clarity around crypto regulation.
Industry Reactions
While many are welcoming the SEC’s changes, not everyone is satisfied. Gemini president and co-founder Cameron Winkelvoss has called for retribution for the costs and time spent defending against the SEC’s probe, a request that legal experts consider unlikely to be granted. The SEC’s new direction points to an effort to create a more effective regulatory structure for crypto and digital assets, but this does not necessarily mean that their earlier approaches were ill-intentioned or deserving of punishment.
