On May 21, 2025, the SEC once again brought crypto regulation into the spotlight. Unicoin was accused of raising over $100 million through false statements, claiming its token was backed by billions of dollars in assets when its actual value was much lower than expected.

Over the past decade, SEC's regulation of the crypto industry has gone through ups and downs, from cracking down on fraudulent ICOs to comprehensive enforcement actions against major exchanges. With a new SEC chair who is crypto-friendly, regulation appeared to have eased, dismissing several old cases. However, with new lawsuits emerging, is strict regulation making a comeback?

SEC's "Regulatory Storm"

Since the SEC's first enforcement action against cryptocurrency in 2013, the crypto industry has been a regulatory "gray area." The cornerstone of SEC's regulation is the 1946 Howey Test, used to determine whether an asset is a security, involving "investment of money, common enterprise, expectation of profits from the efforts of others." While this standard is clear-cut in traditional finance, it has sparked numerous debates in the complex environment of DeFi and tokenomics. The SEC has long relied on ad-hoc enforcement actions rather than clear rules to govern the digital asset industry, leading to a lack of predictability in the market, leaving investors and businesses in compliance limbo.

In the early days of cryptocurrency, initial token offerings emerged rapidly, but many projects were suspected of fraud. In 2017, the SEC released the "DAO Report," explicitly stating that tokens could be deemed securities, marking the formal intervention of regulation. In the same year December, SEC filed a lawsuit against PlexCorps, accusing it of raising $15 million through false advertising, commencing a tough crackdown on fraudulent ICOs. In 2018, the BitConnect case became a focal point as the platform raised over $2 billion through a Ponzi scheme investment plan, falsely promising high returns, ultimately being ordered to pay hefty fines in 2021. The common thread in these early cases was that project teams deceived investors through false statements or misappropriation of funds, with the SEC's enforcement goal being to protect investors from the harm of the "Wild West" crypto market.

In 2021, Gary Gensler took office as the SEC chair, ushering in a "Regulatory Storm" for the crypto industry. Gensler advocates for "enforcement as regulation," believing that the vast majority of crypto assets are securities and must comply with federal securities laws. In June 2023, SEC launched a heavyweight lawsuit against Binance and Coinbase, accusing them of operating as unregistered security exchanges involving dozens of tokens such as BNB, SOL, ADA.

Binance has been accused of selling securities illegally and manipulating the market, while Coinbase has been charged with providing unregistered brokerage and clearing services. These lawsuits not only shook the market but also led to a 5.2% to 17.2% decline in the prices of related tokens. Meanwhile, the Ripple case that started in 2020 became an industry benchmark, with the SEC accusing Ripple of raising $1.3 billion through the unregistered sale of XRP. In 2023, the court ruled that XRP may not necessarily be a security when traded on the secondary market, but the programmatic sales were still deemed illegal, highlighting the complexity of regulatory definitions. The 2022 Terraform Labs case further exposed market risks, with the SEC alleging that its founder, Do Kwon, manipulated the market through TerraUSD and LUNA, resulting in investors losing billions of dollars.

These cases reflect a tough stance during the Gensler era, where high-profile lawsuits were used to define regulatory boundaries and attempt to integrate the crypto industry into the traditional financial framework. However, the enforcement during the Gensler era was based on the 1933 Securities Act, attempting to fit brand-new digital assets forcefully into a traditional framework, lacking adaptability and clarity.

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Crypto-Friendly Regulatory Shift

Ever since Trump returned to the White House, he has consistently made "crypto-friendly" a key part of his political agenda. On April 10, 2025, the SEC under Trump welcomed its new chairman, Paul Atkins, marking a significant shift in regulatory direction. Known for his pro-market stance, Atkins emphasized regulating the crypto industry through clear rules rather than pure enforcement. In February 2025, the SEC dropped civil lawsuits against Ripple, Coinbase, and Kraken, concluding the landmark cases of the Gensler era.

Furthermore, the SEC abolished Staff Accounting Bulletin 121 (SAB 121), returning crypto asset custody to off-balance-sheet items and clarifying that self-mining and pool activities generally do not constitute securities. These measures were seen as an "unleashing" of the crypto industry, aiming to relieve companies of compliance burdens and ignite innovation. The SEC's previous "patchwork enforcement" lacked user-friendliness and failed to provide a predictable compliance path, and Atkins' actions are now attempting to change that status quo.

More importantly, Atkins spearheaded the formation of a Crypto Task Force led by SEC Commissioner Hester Peirce, aimed at collaborating with the industry to develop clear rules covering stablecoins, meme coins, and DeFi. Peirce announced on February 21 a public notice seeking input on crypto assets and blockchain technology, presenting over 100 questions across four categories, including security-type crypto assets, tokens in investment contracts, tokenized securities, and non-security-type crypto assets.

The efforts of this task force are not limited to the SEC alone but also align with the digital asset executive order signed by Trump on January 23, establishing an interagency digital asset working group involving entities such as the SEC, Commodity Futures Trading Commission (CFTC), and other institutions. This interagency collaboration aims to address the long-standing issue of regulatory overlap in the industry, where the SEC may consider a token a security, the CFTC may view it as a commodity, and the Consumer Financial Protection Bureau (CFPB) may categorize it as "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, signaling a shift from "punishment-driven" to "guidance-driven" regulation.

Related Reading: "New Chairman Takes Office, SEC Becomes "Crypto Daddy" in 48 Hours"

Why Another Lawsuit?

Despite Atkins withdrawing multiple lawsuits since taking office, several new cases this year have sparked speculation about whether regulation is tightening. These cases include the Unicoin case, Nova Labs case, crypto executive fraud case, and Coinbase user data investigation. Why is the SEC pursuing lawsuits frequently despite a relaxed policy environment? The answer lies in regulatory boundaries, industry complexity, and the transitional period of rule-making.

The Unicoin case this time around may be a landmark case for 2025. The SEC accuses Unicoin and its executives of raising over $100 million through false statements, claiming their token was backed by billions of dollars in assets, when its actual value was significantly lower, misleading over 5,000 investors. Additionally, the company is charged with selling 37.9 million unregistered warrants. Fraud remains the SEC's regulatory baseline, aligning closely with its core mission of investor protection. Even as enforcement efforts may ease, the SEC will continue to focus on fraud and Ponzi schemes, particularly in safeguarding retail investors.

The controversy surrounding unregistered securities issuance has not yet been definitively resolved. The allegations in the Unicoin case extend beyond fraud to encompass the sale of unregistered securities. Despite Atkins' efforts to promote rule-making, the applicability of the Howey test has not been fully clarified. During Gensler's tenure, there was an attempt to categorize all tokens as securities, while the new task force sought to distinguish between different types of crypto assets, such as security tokens and non-security tokens. This more precise regulation has shifted the focus of cases in 2025 towards specific violations rather than a broad challenge to the legality of exchanges or tokens.

Furthermore, the SEC's demand for data transparency is on the rise. On May 15, the SEC initiated an investigation into Coinbase, questioning its exaggeration of "verified users" in its IPO filing, which may have misled investors. The Coinbase case had two tracks: the SEC accused its trading platform of unlawfully operating an unregistered securities exchange, while Coinbase itself filed a lawsuit seeking clear rules from the SEC. In early 2025, the Third Circuit Court ruled that the SEC's reasons for rejecting Coinbase's rule-making request were insufficient and ordered further explanation. Subsequently, the SEC withdrew its lawsuit in the Second Circuit Court, indicating a shift in regulatory focus. This case marks the SEC's transition from merely defining securities to a broader compliance review, especially in terms of financial disclosure.

The complexity of the crypto industry and regulatory lag are the deep-seated reasons behind new litigation. From DeFi to NFTs to asset-backed tokens, the rapid market development has made it challenging for the regulatory framework to keep pace. Emerging models like asset-backed tokens in the Unicoin case have forced the SEC to test regulatory boundaries through enforcement actions. The "turf war" between the SEC, CFTC, and CFPB has intensified regulatory uncertainty, while Atkins' task force and cross-agency working groups are attempting to address this issue. Nevertheless, the rule-making process takes time, and litigation remains a primary tool to fill regulatory gaps in the short term.

Is Cryptocurrency Regulation About to "Flip" Again?

The new litigation in 2025 exhibits significant differences in targets, scope, and impact compared to the past decade, reflecting the evolution of the SEC's regulatory strategy. Firstly, enforcement targets are more focused. During Gensler's tenure, the SEC attempted to bring the majority of crypto assets into the securities framework by targeting leading companies like Binance and Coinbase, designating 68 tokens as securities, causing widespread market disruption. However, the new 2025 litigation focuses more on specific violations, such as fraud and unregistered sales in the Unicoin case, avoiding attacks on the entire ecosystem, showing the SEC's inclination to combat "bad actors." Gensler's enforcement was based on the outdated 1933 Securities Act, lacking adaptability, while the new task force aims to create "fair rules" suitable for digital assets.

Secondly, the scope of litigation has become more precise. Historical cases such as the Ripple and Binance cases involved billions of dollars in transactions and multiple tokens, affecting the entire market. In contrast, the Unicoin case involved $100 million, the Nova Labs case settled for only $200,000, and the Coinbase investigation was limited to data disclosure issues without impacting its core business. The scale and impact of new cases are more limited, avoiding significant market fluctuations.

Furthermore, regulatory rhetoric has become more moderate. Litigation during Gensler's tenure was often accompanied by strong statements, such as "almost all crypto assets are securities," leading to strong industry backlash. Under Atkins's leadership, the SEC has focused more on industry collaboration, revoking SAB 121 and establishing a crypto asset task force, demonstrating support for innovation. The wording of new litigation focuses on specific violations rather than rejecting the entire industry, showing a more moderate regulatory stance. Hester Peirce's public request for comment action was "quite unusual," reflecting the SEC's emphasis on industry cooperation.

Lastly, legal disputes have decreased. In the Ripple case, the court made a split ruling on XRP's security status, highlighting the limitations of the Howey test. In contrast, new litigation such as the Unicoin case is mainly based on fraud and unregistered sales, resulting in fewer legal disputes and avoiding the complexity of defining token attributes. This precise enforcement helps reduce industry uncertainty. With the emergence of clear rules, there may be more private securities litigation and class actions in the future, while the SEC's enforcement resources will focus more on traditional fraud and Ponzi schemes.

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