SEC Pullback Leaves Crypto Enforcement to State, Private Suits

The SEC’s dismissal of its case against cryptocurrency giant Binance Holdings Ltd. marks a near-total reversal of the Biden-era crackdown on digital asset companies, as policy makers grapple with how to regulate the high-flying industry.

The Securities and Exchange Commission last month dropped its suit against Binance, the world’s largest crypto exchange that stood accused of mishandling customer funds and misleading investors and regulators. The Wall Street watchdog under Trump-appointed leaders has now tossed or paused around a dozen crypto enforcement actions.

“The SEC’s dismissal of its Binance suit underscores the agency has drastically recalibrated its enforcement strategy in the digital asset space,” said Kaela Dahan, counsel at Reed Smith LLP who has represented companies charged with crypto-related fraud. “It’s just another signal that US agencies have put regulation by enforcement in the rearview mirror.”

But while the crypto industry celebrates the SEC’s enforcement wind-down under Chairman Paul Atkins, the road ahead will likely be littered with an assortment of rules and enforcement actions from various parties.

The SEC’s crypto task force this week hosted its fourth and final roundtable convening industry participants and academics to discuss the agency’s approach to potential rulemaking and digital asset regulation writ large. The four panels, framed as a “spring sprint toward crypto clarity,” have offered more questions than simple answers for how the SEC should police crypto exchanges and issuers.

“I am unsure whether we’ve identified much that can be simply or quickly clarified,” Democratic Commissioner Caroline Crenshaw said, introducing a June 9 panel. “What we are facing is heightened expectations of rolling out major changes—quickly—to pave the way for crypto expansion into the capital markets.”

No matter what path the SEC’s rule-writers take, crypto companies will still have to contend with suits from state regulators and private litigants, which securities lawyers say could become more frequent in the absence of SEC scrutiny.

Meanwhile, legislation winding through Congress would give the Commodity Futures Trading Commission jurisdiction to police crypto alongside the SEC, complicating an already fraught duality of enforcement approaches from the agencies.

Deregulation Versus Recalibration

The SEC roundtables underscore the need for reliable rules that provide the industry a perception of legality, said Republican Commissioner Hester Peirce, who heads the crypto task force.

“We’re really trying to get to actionable things that people can use,” she told Bloomberg Law on the sidelines of a panel this week.

Atkins alluded to an “innovation exemption” in his remarks at the June 9 roundtable, announcing that he had directed staff to consider allowing both SEC registrants and non-registrants to introduce new “on chain products and services” while the agency works toward rules for digital asset markets.

The roundtable and task force approach isn’t merely a “dog and pony show” to make industry stakeholders feel welcome under a new SEC administration, but exists as part of the larger recalibration around crypto jurisdiction, Dahan said.

Owen Kurtin, founding member of Kurtin PLLC who has helped negotiate commercial deals involving crypto companies, took a different view on the SEC’s Trump-era crypto agenda.

“There is a very obvious, express deregulatory bias towards the crypto industry, both crypto issuers and exchanges like Coinbase and Binance,” Kurtin said. “But the SEC is not the last word in this, since there is a hugely developed body of law and regulation on what constitutes a security and what constitutes a fraudulent or deceptive issuing or offer for sale of a security.”

Investor plaintiffs are likely to fill any enforcement gaps with a higher volume of federal lawsuits against crypto exchanges and issuers as digital assets become more popular, both lawyers agreed. Local securities regulators could also step in under the auspices of blue sky laws to police fraud, bringing their own suits in state court, according to Kurtin.

Congress Steps In

The agency’s initial sprint toward its stated goal of regulating cryptocurrency has occurred alongside lawmakers’ efforts to push crypto-related bills through Congress, raising many of the same thorny jurisdictional questions around the nature of digital assets.

“All of this, then and now, has happened in a vacuum of no legislation,” said Omid Malekan, an associate professor at Columbia Business School who was a panelist at this week’s crypto roundtable. “We need to be a little bit sympathetic to the regulators because their job is a lot harder when they don’t have the right guidance from Congress.”

The “GENIUS Act” (S. 1582), which would set standards for regulating dollar-based stablecoin issuers and transactions outside the SEC’s purview, is slated for a key procedural vote in the Senate this week. A previous attempt to advance the legislation was stymied by a Democratic bloc over concerns about President Donald Trump profiting from crypto ventures while he holds office.

Meanwhile, the House Agriculture and Financial Services committees on Tuesday approved the “CLARITY Act” (H.R. 3633), which aims to clarify whether firms should register as trading systems, digital commodity exchanges, brokers, or dealers and would give the CFTC authority over crypto spot markets.

“There’s an interesting joint regime proposal between the SEC and CFTC where the SEC is involved when raising money for a crypto project clearly triggers securities laws, but then when it’s about the things that have been deemed digital commodities or coins tied to projects that are sufficiently decentralized, then it becomes CFTC jurisdiction,” Malekan said.

The CFTC asked for $410 million in its fiscal 2026 budget request, a 12% hike over last year. But at least one CFTC veteran cautioned that the agency may not be equipped to take on the extra work overseeing cryptocurrencies.

“If the CFTC is given significant responsibilities for the digital asset market, then that will obviously shift what they have to do,” said Timothy Massad, who led the agency under the Obama administration and is now a research fellow at Harvard University’s Kennedy School of Government. “I worry very much that they won’t have sufficient resources.”