U.S. SEC’s Digital Asset Crackdown Eases: Temporary Win or Long-Term Victory?
25 March 2025
Taken from the published LinkedIn pulse article.
On January 23rd 2025, US President Trump’s “pro-crypto” executive orders instigated a marked shift in regulatory enforcement of the digital asset industry from the heavy-handed approach seen under the previous Biden administration. Since then, the US Securities and Exchange Commission (SEC) has withdrawn lawsuits against a number of major digital asset firms such as Ripple Labs, Kraken, Robinhood, Coinbase and Gemini, reversing its aggressive stance under former Chair Gary Gensler. While this retreat is hailed as a big win for the industry, is it a lasting victory or just a short-lived breakthrough?
With Mark Uyeda now Acting Chairman of the SEC and promising clear, well-defined regulations for digital assets, the U.S. approach to the industry is undergoing a major shift. Proponents vaunt that this signals a move away from past uncertainty and towards a more structured framework for the industry’s future. Indeed, for years, outdated laws like the Howey Test have been applied to blockchain innovations, creating uncertainty and stifling growth, and the creation of the SEC Crypto Task Force, led by Commissioner Hester Peirce, presents a real opportunity to accelerate adoption and provide the clarity the industry has long needed. Clearer regulations could open the door to greater institutional investment, mainstream adoption, and innovation. However, the future remains uncertain - regulatory shifts could still occur under the new administration, leaving the industry in a familiar state of flux.
The recent decisions by the SEC to dismiss or pause several high-profile lawsuits against digital asset firms signal a significant shift in regulatory approach, potentially redefining the landscape of the industry. Below are just a few examples of this retreat, though a full list can be found here.
Ripple Labs:
On March 19th 2025, the SEC officially dismissed its legal action against blockchain technology company Ripple, concluding a four-year legal battle. The SEC initially sued Ripple in December 2020, alleging that the company’s sales of XRP constituted an unregistered securities offering. Ripple’s CEO, Brad Garlinghouse, described the lawsuit as “the first major shot fired in the war on crypto.” The case’s dismissal represents a significant moment in the ongoing regulatory landscape as one of the longest-standing legal disputes between the SEC and a digital asset firm ends.
Kraken:
On March 3rd 2025, the SEC agreed to dismiss its lawsuit against digital asset exchange Kraken, which had been filed in November 2023 over allegations of operating as an unregistered securities broker, clearing agency and dealer. Kraken's CEO, Dave Ripley, hailed the decision as a pivotal moment for the future of digital assets in the U.S., describing it as a “turning point for the future of crypto in the US”, emphasising the importance of regulatory clarity for innovation and growth.
Consensys:
On February 28th 2025, the SEC dropped its case against blockchain technology company Consensys, which had been accused of offering unregistered securities through MetaMask, its popular Ethereum wallet. Consensys argued that the Ethereum wallet was just an interface, not acting as a financial intermediary. The case’s dismissal marks a shift in regulatory approach, raising hopes for clearer digital asset guidelines.
Coinbase:
On February 27th 2025, the SEC announced the dismissal of its civil enforcement action against digital asset exchange Coinbase, marking a significant shift in regulatory strategy. The lawsuit, originally centred on allegations that Coinbase offered unregistered securities and operated as an unlicensed broker-dealer, had the potential to redefine the industry’s regulatory landscape. While the SEC emphasised that the dismissal was not a judgment on the merits of the case, it signals a broader move towards collaboration rather than enforcement-led policymaking.
OpenSea:
On February 22nd 2025, the SEC closed its investigation into NFT (non-fungible token) marketplace OpenSea, dismissing claims that NFTs qualify as securities. The agency had alleged that NFT sales violated securities laws, but OpenSea maintained that such classification would be a misinterpretation of the law and a setback for innovation. Founder David Finzer emphasised that NFTs empower creators and should remain free from “unnecessary regulatory burdens”. He warned that labelling them as securities could jeopardise artists' livelihoods and stifle creativity. With the case closed, OpenSea remains committed to supporting creators and fostering an open, innovative digital economy.
Implications for the Industry:
These developments mark a crucial turning point for the digital asset industry, hinting at a shift towards a more collaborative regulatory environment. The SEC's recent decision to dismiss and pause lawsuits signals a move from aggressive enforcement, creating a more predictable and transparent regulatory framework. This shift could boost innovation by giving digital asset companies the confidence to expand, attracting institutional investors who are hesitant due to regulatory uncertainty. With clearer rules, the U.S. could become a global blockchain hub, drawing talent and fostering new opportunities, ultimately driving economic growth and solidifying its leadership in the digital asset and blockchain space.
While the SEC’s retreat feels like a win for the industry, its long-term impact is not clear-cut. Trump’s “pro-crypto” stance and executive orders do signal a less heavy-handed approach, but a future administration could easily reverse course, creating an unpredictable regulatory landscape. This uncertainty makes it difficult for digital asset companies to plan and invest confidently. Adding to the scepticism is Trump’s launch of the OFFICIAL TRUMP coin on January 17th, which inside and outside the industry perceive as a personal cash grab rather than a genuine effort to support the industry’s growth. If regulatory shifts are driven more by political interests than long-term policy goals, the sector’s stability could be at risk, leaving businesses to question whether these changes are truly in their favour or just a temporary move.
And while the SEC is in retreat, many digital asset firms are firing back at the Wall Street regulator, which may not bode in their long-term favour. For example, Coinbase CEO Brian Armstrong and Ripple’s top lawyer, Stuart Alderoty, have both publicly urged the industry to boycott law firms that hire former SEC officials linked to the crackdown on digital assets, while Gemini’s Cameron and Tyler Winklevoss are demanding the agency publicly fire and shame investigators who pursued them. This level of retaliation is unprecedented, turning regulatory disputes into personal vendettas. While the frustration is valid, pushing too hard could backfire – and lead to a future SEC - under an administration of a different political stripe – to crack down even harder. The challenge is striking the right balance: fighting for fair rules while keeping the conversation open to avoid stifling innovation.
As the U.S. digital asset ecosystem experiences unprecedented shifts, key questions remain. While the SEC’s easing of enforcement offers short-term relief and optimism, the unpredictable nature of political shifts - especially under the Trump administration - raises doubts about long-term stability. Will future administrations revert to stricter rules? Political dynamics seem to have heavily influenced these changes, but how will that impact the sector’s stability in the long term? With a less hands-on approach by the SEC and the anticipation of fewer regulations, will the onus shift to digital asset firms to step up their own self-regulation to protect investors and build trust? Plus, as other nations solidify their digital asset frameworks, how will the U.S. stay competitive globally? These evolving issues are crucial for the industry's long-term future, and Appold will be closely monitoring the fast-moving regulatory landscape in the U.S. as it continues to develop.
Reach out to us for further discussion.
For further information, please contact:
info@appold.com