Written by: Marcus Wolter, Ai-Jo Wu, and Elizabeth Bestwick

Crypto regulation is rapidly evolving, requiring businesses and investors to stay informed. Scanning the regulatory horizon, in particular, understanding the SEC’s rules, landmark legal cases, and shifting policy landscapes is essential for navigating the digital asset ecosystem.

Why Crypto Regulation Matters

During the previous administration, the Crypto industry faced increasing regulatory scrutiny, particularly from the U.S. Securities and Exchange Commission (SEC).  As digital assets exploded in popularity, the SEC was tightening its grip, raising questions about investor protection, fraud, and market stability. The agency has raised concerns over investor protection, fraud, and market stability as digital assets gain wider adoption.[1] As a result, regulatory frameworks intensified, shaping business operations, investment strategies, and development in the sector.

THE key legal question was (and still is) whether a particular digital asset qualifies as a security. If it does, it falls under the SEC’s jurisdiction, requiring compliance with federal securities laws. This classification directly influences how tokens are issued, traded, and held, playing a crucial role in the industry’s direction. The SEC argues that many digital assets function as securities because they involve investment contracts that promise potential profits to investors based on the efforts of a third party.[2] This classification wasn’t just a technicality; it was a game-changer for how tokens were issued, traded, and held. And with the SEC’s enforcement hammer coming down hard, the crypto industry felt the heat. Even worse: the SEC appeared to make it a strategy to make vague statements and to leave the industry in the dark.

A look back: The SEC and Crypto Regulation

The SEC plays a central role in regulating digital assets, ensuring issuers and exchanges adhere to securities laws. A key tool in this regulatory approach is the Howey Test, which originates from a 1946 Supreme Court case and remains a crucial standard for determining whether a transaction constitutes an investment contract and thus a security. This test assesses whether a transaction involves an investment of money in a common enterprise with an expectation of profit derived from the efforts of others. If an asset meets these criteria, it is considered a security and falls under SEC regulations, including registration requirements and investor protections.[2]

Several high-profile cases have influenced crypto regulation. In SEC v. Ripple Labs, Inc., the SEC claimed XRP, Ripple’s token, was an unregistered security.[2] The case raised important questions about whether tokens traded in secondary markets fall under securities laws. The SEC also alleged, in its lawsuit against Coinbase Global, Inc., that the company’s staking services constituted unregistered securities offerings, potentially setting a precedent for how exchanges handle yield-generating products.[3] Additionally, the SEC targeted Kraken’s staking program, leading to a settlement and operational restrictions in the U.S., signaling stricter oversight of exchange-based staking services.[4] These cases underscore the SEC’s crypto-hostile approach to enforcement and its broad interpretation of securities laws, which has generated industry debate over the agency’s regulatory reach.

Evolving Crypto Regulation – The Outlook

Trump Administration’s Shift (2025):

Fast forward to 2025, and the regulatory landscape could look very different. The political landscape significantly influences crypto regulation. In 2025, the Trump administration implemented major policy shifts, aiming to foster innovation while reconsidering the role of federal oversight. The administration rescinded Biden-era policies through an executive order, Strengthening American Leadership in Digital Financial Technology. It prioritized private sector growth, reducing regulatory barriers to encourage digital asset development while balancing investor protections.[5] The administration also established the Working Group on Digital Assets Markets to explore regulatory clarity and the feasibility of federal crypto reserves.[6] While proponents view these changes as a way to spur economic growth and innovation, critics argue that deregulation could increase market volatility and investor risks.

SEC’s Policy Reversal Under Trump:

Under the new administration, the SEC shifted from an enforcement-heavy approach to a more business-friendly stance. It repealed Staff Accounting Bulletin (SAB) 121, easing restrictions on banks holding crypto assets. The SEC also worked to create clearer regulatory guidelines, aiming to strike a balance between innovation and oversight. This shift from aggressive enforcement to industry collaboration reflects a broader effort to create a more structured yet less restrictive regulatory environment. However, concerns remain about how this approach will address risks associated with fraud, consumer protection, and market stability.[6]

Challenges for Businesses & Investors

Despite evolving policies, businesses and investors must remain vigilant. Crypto regulations continue to develop, creating compliance uncertainties. Key steps to mitigate legal risks include: (i) conducting comprehensive legal analyses before launching new digital assets; (ii) keeping up with SEC policies and enforcement trends to ensure compliance; (iii) implementing robust compliance programs that align with securities laws; and (iv) engaging legal and regulatory experts to mitigate risks of fines and enforcement actions.

This publication is distributed with the understanding that the author, publisher, and distributor of this publication and/or any linked publication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising. The choice of a lawyer is an important decision and should not be based solely upon advertisements.

Sources

[1] Investopedia. (n.d.). How SEC Regulations Will Change Cryptocurrency Markets. Investopedia. https://www.investopedia.com/news/how-sec-regs-will-change-cryptocurrency-markets/

[2] U.S. Securities and Exchange Commission. (2024, July 2). Remarks on the Age of Crypto. SEC. https://www.sec.gov/newsroom/speeches-statements/grewal-remarks-age-crypto-070224

[3] U.S. Securities and Exchange Commission. (2023, June 6). SEC Charges Coinbase for Operating as an Unregistered Securities Exchange, Broker, and Clearing Agency. SEC. https://www.sec.gov/newsroom/press-releases/2023-102

[4] U.S. Securities and Exchange Commission. (2023, February 9). Kraken to Discontinue Unregistered Offer and Sale of Crypto Asset Staking-As-A-Service Program and Pay $30 Million to Settle SEC Charges. SEC. https://www.sec.gov/newsroom/press-releases/2023-25

[5] Carlton Fields. (2025, January 12). Trump Administration’s Executive Order on Digital Assets: A Significant Shift in U.S. Crypto Policy. Carlton Fields. https://www.carltonfields.com/insights/publications/2025/trump-administrations-executive-order-on-digital-assets-a-significant-shift-in-u-s-crypto-policy

[6] National Law Review. (2025, January 15). White House Embraces Crypto, SEC Opens Door for Banks. National Law Review. https://natlawreview.com/article/white-house-embraces-crypto-sec-opens-door-banks#google_vignette