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, while its actual value was far lower than expected.
Over the past decade, the SEC's regulation of the crypto industry has gone through significant changes, from combating fraudulent ICOs to comprehensive enforcement against major exchanges. With a pro-crypto chairman taking office, regulation seemingly softened, with several old cases being withdrawn. But now that litigation is resurging, is strict regulation making a comeback?
SEC's "Regulatory Storm"
Since the SEC first took enforcement action against cryptocurrencies in 2013, the crypto industry has remained a "gray area" for regulation. The SEC's core regulatory tool is the 1946 Howey Test, used to determine whether an asset is a security, specifically involving "money investment, common enterprise, expecting profits from others' efforts". While this standard was clear in traditional finance, it has sparked numerous controversies in the complex environment of DeFi and token economics. The SEC has long relied on sporadic enforcement actions rather than clear rules to regulate the digital asset industry, leading to market unpredictability and compliance challenges for investors and businesses.
... (The translation continues in the same manner, maintaining the original structure and translating all text outside of HTML tags while preserving the tags themselves.)Moreover, the SEC's requirements for data transparency are being upgraded. On May 15, the SEC launched an investigation into Coinbase, questioning the potential misleading of investors by overstating the number of "verified users" in its IPO filing. The Coinbase case was previously divided into two tracks: the SEC accused its trading platform of illegally operating an unregistered securities exchange, while Coinbase proactively filed a lawsuit demanding that the SEC establish clear rules. 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 purely focusing on securities definition to a broader compliance review, especially in financial disclosure.
The complexity of the crypto industry and regulatory lag are the deep-seated reasons for new lawsuits. From DeFi to Non-Fungible Tokens to asset-backed tokens, the rapid market development makes the regulatory framework difficult to keep up. Emerging models involving asset-backed tokens, as in the Unicoin case, force the SEC to test regulatory boundaries through enforcement. The "turf war" between the SEC, CFTC, and CFPB has intensified regulatory uncertainty, while Atkins' task force and inter-agency working groups are trying to address this issue. Nevertheless, the rule-making process takes time, and litigation remains the primary tool for filling regulatory gaps in the short term.
Is Crypto Regulation About to "Reverse" Again?
Compared to the past decade, the new lawsuits in 2025 show significant differences in targets, scope, and impact, reflecting the evolution of SEC regulatory strategies. First, enforcement targets are more focused. During Gensler's period, the SEC attempted to bring most crypto assets under the securities framework through lawsuits against leading companies like Binance and Coinbase, identifying 68 tokens as securities, which caused widespread market turbulence. The new lawsuits in 2025 focus more on specific violations, such as Unicoin's fraud and unregistered sales, avoiding attacks on the entire ecosystem, showing the SEC's preference for targeting "bad actors". The enforcement during Gensler's period was based on the outdated 1933 Securities Act, lacking adaptability, while the new task force aims to establish "fair rules" suitable for digital assets.
Secondly, the scope of lawsuits is more precise. Historical cases like Ripple and Binance involved billions of dollars in transactions and multiple tokens, affecting the entire market. The Unicoin case involves $100 million, the Nova Labs settlement is only $200,000, and the Coinbase investigation is limited to data disclosure issues without touching its core business. The new cases have more limited scale and impact, avoiding significant market volatility.
Additionally, the regulatory tone is more moderate. Lawsuits during Gensler's period were often accompanied by hard-line statements like "almost all crypto assets are securities", triggering strong industry backlash. Under Atkins' leadership, the SEC focuses more on collaborating with the industry, withdrawing SAB 121 and establishing a crypto task force, showing support for innovation. The new lawsuits' language focuses on specific violations rather than negating the entire industry, demonstrating a more moderate regulatory approach. Hester Peirce's "unusually" open call for comments reflects the SEC's emphasis on industry collaboration.
Finally, legal disputes have decreased. In the Ripple case, the court made a split ruling on XRP's securities status, highlighting the limitations of the Howey test. The new lawsuits like Unicoin primarily focus on fraud and unregistered sales, with fewer legal disputes, avoiding the complexity of defining token attributes. This precise enforcement helps reduce industry uncertainty. As clear rules are established, more private securities and class-action lawsuits may emerge in the future, while the SEC's enforcement resources will focus more on traditional fraud and Ponzi schemes.
