On May 21, 2025, the SEC once again thrust crypto regulation into the spotlight. Unicoin was accused of raising more than $100 million through false statements, claiming that its tokens were backed by billions of dollars in assets, when the actual value was far less than expected.
Over the past decade, the SECs regulation of the crypto industry has gone through ups and downs, from cracking down on fraudulent ICOs to comprehensive enforcement against large exchanges. After the new pro-crypto chairman took office, regulation was significantly relaxed, and many old cases were withdrawn. Now that the lawsuit has been revived, will strong regulation make a comeback?
SEC’s “Regulatory Storm”
Since the SEC first took enforcement action against cryptocurrencies in 2013, the crypto industry has been a regulatory gray area. The SECs core regulatory tool is the 1946 Howey test, which is used to determine whether an asset is a security, that is, whether it involves an investment of money, a common cause, and the expectation of profit from the efforts of others. This standard is clear in traditional finance, but it has caused a lot of controversy in the complex environment of DeFi and the token economy. The SEC has long relied on scattered enforcement actions rather than clear rules to regulate the digital asset industry, resulting in a lack of predictability in the market and compliance difficulties for investors and companies.
In the early days of cryptocurrency, initial token offerings sprang up, but many projects were suspected of fraud. In 2017, the SEC released the DAO Report, which clearly stated that tokens may 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 propaganda, opening a tough crackdown on fraudulent ICOs. In 2018, the BitConnect case became the focus. The platform raised more than $2 billion through a Ponzi-style investment plan, falsely promised high returns, and was eventually sentenced to pay a huge fine in 2021. The common feature of these early cases is that the project party deceived investors through false statements or misappropriation of funds. The SECs enforcement goal is clear, which is to protect investors from the wild growth of the crypto market.
In 2021, after Gary Gensler became the chairman of the SEC, the crypto industry ushered in a regulatory storm. Gensler advocates enforcement is regulation and believes that the vast majority of crypto assets are securities and must comply with federal securities laws. In June 2023, the SEC launched a heavy lawsuit against Binance and Coinbase, accusing them 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 accused of providing unregistered brokerage and clearing services. These lawsuits not only shocked the market, but also caused the prices of related tokens to fall by 5.2% to 17.2%. During the same period, the Ripple case, which began in 2020, became an industry benchmark. The SEC accused Ripple of raising $1.3 billion through unregistered sales of XRP. In 2023, the court ruled that XRP trading in the secondary market was not necessarily a security, but programmatic sales were still a violation. This split ruling highlighted the complexity of regulatory definitions. The Terraform Labs case in 2022 further exposed market risks. The SEC accused its founder Do Kwon of manipulating the market through TerraUSD and LUNA, causing investors to lose billions of dollars.
These cases reflect the tough stance of the Gensler era, which used high-profile lawsuits to draw regulatory red lines and try to bring the crypto industry into the traditional financial framework. However, the enforcement during the Gensler era was based on the Securities Act of 1933, which attempted to force brand-new digital assets into the traditional framework, lacking adaptability and clarity.
A crypto-friendly regulatory turn
Since Trump returned to the White House, he has been making crypto-friendly one of his important political declarations. On April 10, 2025, the SEC under Trump welcomed its new chairman, Paul Atkins, who brought about a significant change in the regulatory direction. Atkins, known for his pro-market stance, emphasizes regulating the crypto industry by formulating clear rules rather than simply enforcing the law. In February 2025, the SEC withdrew its civil lawsuits against Ripple, Coinbase, and Kraken, ending the landmark case of the Gensler era.
In addition, the SEC repealed Staff Accounting Bulletin 121 (SAB 121), restored crypto asset custody to an off-balance sheet item, and clarified that self-mining and mining pool activities generally do not constitute securities. These measures are seen as unbundling the crypto industry, aimed at reducing the compliance burden on companies and stimulating innovation. The SECs previous patchwork enforcement lacked user-friendliness and failed to provide a predictable compliance path, and Atkinss move is trying to change this situation.
More importantly, Atkins promoted the establishment of a crypto task force, led by SEC Commissioner Hester Peirce, to work with the industry to develop clear rules covering stablecoins, memecoins, and DeFi. Peirce issued a notice on February 21, inviting the public to provide opinions on crypto assets and blockchain technology, and raised more than 100 questions covering four major categories, including securities crypto assets, tokens in investment contracts, tokenized securities, and non-securities crypto assets.
The efforts of this task force are not limited to the SEC, but also echo the digital asset executive order signed by Trump on January 23, which established a cross-agency digital asset working group involving the SEC, the Commodity Futures Trading Commission (CFTC), and other agencies. This cross-agency cooperation aims to solve the regulatory overlap that has long plagued the industry, such as the SECs view that tokens are securities, the CFTCs view that they are commodities, and the Consumer Financial Protection Bureau (CFPB)s view that they are 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, heralding a transition from penalty instead of regulation to guidance instead of regulation.
Related reading: 48 hours after the new chairman took office, the SEC has become a crypto dad
Why the new lawsuit?
Although Atkins withdrew several lawsuits after taking office, several cases this year have also triggered some speculation about whether regulation will be tightened. These cases include the Unicoin case, the Nova Labs case, the crypto executive fraud case, and the Coinbase user data investigation. Why does the SEC still frequently initiate lawsuits in the context of loose policies? The answer lies in the bottom line of regulation, the complexity of the industry, and the transition period of rulemaking.
The Unicoin case could be an important landmark case in 2025. The SEC accused Unicoin and its executives of raising more than $100 million through false statements, claiming that its tokens were backed by billions of dollars in assets, but the actual value was far lower than expected, misleading more than 5,000 investors. In addition, the company was accused of selling 37.9 million rights certificates without registration. Fraud remains the SECs regulatory bottom line, which is highly consistent with its core mission of protecting investors. Even if enforcement efforts are weakened, the SEC will continue to focus on fraud and Ponzi schemes, especially the protection of retail investors.
The controversy over unregistered securities offerings has also not been clearly resolved. The allegations in the Unicoin case were not limited to fraud, but also involved unregistered securities sales. Despite Atkins push for rulemaking, the applicability of the Howey test has not yet been fully clarified. While Gensler tried to treat all tokens as securities, the new task force attempts to distinguish between different types of crypto assets, such as security tokens and non-security tokens. This precise regulation allows the 2025 case to focus more on specific violations rather than comprehensively challenging the legality of exchanges or tokens.
In addition, the SECs demands for data transparency are escalating. On May 15, the SEC launched an investigation into Coinbase, questioning whether it had exaggerated the number of verified users in its IPO documents, which could mislead investors. The Coinbase case was divided into two tracks: the SEC accused its trading platform of illegally operating an unregistered securities exchange, while Coinbase took the initiative to file a lawsuit asking the SEC to establish clear rules. In early 2025, the Third Circuit Court ruled that the SECs rejection of Coinbases request for rulemaking was insufficient and ordered it to explain further. Subsequently, the SEC withdrew its lawsuit in the Second Circuit Court, showing a shift in regulatory focus. This case marks the SECs shift from a simple focus on securities definitions to a broader compliance review, especially in terms of financial disclosures.
The complexity of the crypto industry and the lag in regulation are the underlying reasons for the new lawsuit. From DeFi to NFT to asset-backed tokens, the rapid development of the market makes it difficult for the regulatory framework to keep up. Emerging models such as asset-backed tokens involved in the Unicoin case have forced the SEC to test the boundaries of regulation through law enforcement. The turf war between the SEC, CFTC, and CFPB has exacerbated regulatory uncertainty, and Atkins task force and inter-agency working group are trying to address this issue. Nevertheless, the rule-making process takes time, and litigation remains the main tool to fill regulatory gaps in the short term.
Is crypto regulation going to “reverse” again?
The new lawsuits in 2025 show significant differences in goals, scope, and impact compared to the past decade, reflecting the evolution of the SECs regulatory strategy. First, the enforcement targets are more focused. During the Gensler period, the SEC attempted to bring most crypto assets into the securities framework through lawsuits against leading companies such as Binance and Coinbase, and identified 68 tokens as securities, causing widespread market shock. The new lawsuits in 2025 focus more on specific violations, such as Unicoins fraud and unregistered sales, avoiding attacks on the entire ecosystem, showing that the SEC is more inclined to crack down on bad apples. Enforcement during the Gensler period was based on the outdated Securities Act of 1933 and lacked adaptability, while the new task force aims to develop fair rules suitable for digital assets.
Second, the scope of the lawsuit is more precise. Historical cases such as Ripple and Binance involved billions of dollars in transactions and multiple tokens, affecting the entire market. The Unicoin case involved $100 million, the Nova Labs case settlement amount was only $200,000, and the Coinbase investigation was limited to data disclosure issues and did not touch its core business. The scale and impact of the new case are more limited, avoiding drastic market fluctuations.
In addition, the regulatory tone is milder. Genslers lawsuits were often accompanied by tough statements, such as crypto assets are almost all securities, which triggered a strong backlash in the industry. The SEC under Atkins leadership is more focused on cooperation with the industry, and the revocation of SAB 121 and the establishment of the Crypto Task Force show support for innovation. The wording of the new lawsuit focuses on specific violations rather than denying the entire industry, showing a milder regulatory stance. Hester Peirces public comment action is quite unusual and reflects the SECs emphasis on industry cooperation.
Finally, there are fewer legal disputes. In the Ripple case, the court made a split ruling on the securities attributes of XRP, highlighting the limitations of the Howey test. New lawsuits such as the Unicoin case are mainly based on fraud and unregistered sales, with fewer legal disputes and avoiding the complexity of defining the attributes of tokens. 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, and the SECs enforcement resources will be more focused on traditional fraud and Ponzi schemes.
