The US Securities and Exchange Commission (SEC) is changing course on crypto. Since January it has pulled back from major courtroom fights, closed several legacy cases, and moved into formal rulemaking, giving the industry more room to operate in the US. It has also reversed key policies that kept banks out of custody and slowed down efficient ETF trading.
The turn began under Acting Chair Mark Uyeda and has gathered pace under current Chair Paul Atkins.
Under former President Joe Biden, Gary Gensler's SEC was strict on digital assets. A former chairman of the Commodities and Futures Trading Commission (CFTC), he presided over an 84 percent increase in new crypto actions, a 96 percent growth in resolved actions, and a spike of over 300 percent in monetary penalties, according to Cornerstone Research’s 2024 update on SEC crypto enforcement. Gensler relied on lawsuits and broad readings of existing statutes, which left firms guessing and pushed disputes into court.
“It was part of the commission’s larger strategy to use its enforcement tool to regulate the crypto industry,” said Commissioner Hester M. Pierce in a statement in February. She also said Gensler’s SEC “incessantly slammed on the enforcement brakes as it lurched along a meandering route with a destination not discernible to anyone.”
Gensler stepped down on 20 Jan, with President Donald Trump naming Commissioner Mark Uyeda as acting chairman. In April, the Senate approved Paul Atkins, a veteran Washington lawyer who had previously served on the SEC, to take over. Trump described him as a “proven leader for common sense regulations.”
“He believes in the promise of robust, innovative capital markets that are responsive to the needs of Investors, & that provide capital to make our Economy the best in the World. He also recognizes that digital assets & other innovations are crucial to Making America Greater than Ever Before,” the president wrote on Trutch Social in December.
The move drew quick criticism from investor-protection advocates and Democrat politicians, like Senator Elizabeth Warren, who warned of “significant potential conflicts” and a record of pushing “weaker protections.”
Under Uyeda and Atkins, the SEC has opened only a handful of new crypto cases so far, compared with 129 under Gensler, marking a clear shift of resources from enforcement to rulemaking.
Uyeda’s first day drew attention with the announcement of a Crypto Task Force to build a comprehensive framework for regulating digital assets. Commissioner Peirce, a former counsel to Atkins, was chosen to lead it. Nicknamed “Crypto Mom” for her consistent advocacy for the crypto market, Peirce was an obvious choice to lead the group, Coinbase CEO Brian Armstrong said on X in November. She’s “smart, fair, professional. Can work with both sides,” he said.
The SEC hasn’t yet disclosed a detailed budget for the 15-member task force, but referenced the group in its request for fiscal 2026.
The task force set up public roundtables with a focus on defining whether a token is a security, setting registration paths for trading venues and brokers, and establishing custody and disclosure standards. It will use the takeaways from these meetings to draft proposals and guidance for the commission to vote on.
“I am looking forward to drawing on the expertise of the public in developing a workable regulatory framework for crypto… The roundtables are an important part of our engagement with the public,” said Peirce in March.
The shift in focus has shown up most clearly in the big cases the SEC inherited from its previous chairman. Since January, the agency has stepped back from a string of disputes and redirected time and staff toward rulemaking.
In February, the SEC ended a nearly two-year lawsuit alleging the Coinbase exchange ran an unregistered securities platform; Coinbase said the move “righted a major wrong.” The next month, both sides moved to dismiss a 2023 case against Kraken alleging it too was operating an unregistered exchange. The suit closed with no admissions, no penalties, and no changes to the business.
Cases against Consensys, Cumberland DRW, Dragonchain, Ian Balina and others were similarly abandoned. In April, both sides withdrew appeals in case against Ripple, ending a nearly four-year dispute over XRP sales. Ripple faces about 125 million dollars in penalties and an injunction that limits institutional XRP sales.
The retreat in court went hand in hand with two reversals that changed how the crypto market works.
In Staff Accounting Bulletin 121, or SAB 121, the SEC had forced custodians to book client crypto as a balance-sheet liability. That effectively kept big banks out of crypto custody, the safekeeping of clients’ crypto assets. Congress voted to overturn the bulletin in May 2024, though was vetoed by Biden. Days after Uyeda took over, the commission rescinded it, once again opening. the door for banks to offer custody at scale – a crucial step in the formalization of crypto as an asset class.
ETF “cash-only” creations and redemptions were another obstacle in the market. Authorized participants, or APs, could not deliver or receive coins in kind, and had to wire US dollars to a fund, which then bought or sold the coins itself, adding cost and timing risk. The rule effectively barred broker-dealers from handling crypto. In July, chairman Atkins approved “in-kind” dealings for crypto ETFs, meaning APs can deliver or receive the underlying coins instead of cash. “Gensler’s SEC did not want this to happen. This is the first of what will be several steps toward a more pro-crypto SEC,” said Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence in July.
A key reason many crypto firms were flagged for unregistered securities was the SEC’s reliance on an almost 80-year-old rule for deciding when something is an investment contract under securities law. This rule is called the “Howey test” and considers four things. Among the aspects it looks at are whether there is a reasonable expectation of profit, and if that profit comes mainly from the efforts of others, such as a promoter or a third party.
In crypto, many buyers don’t purchase tokens solely as investments. Some want access to a service or voting rights on a protocol, while others simply speculate on price. Most tokens carry no claim on profits or cash flows. The expectation of profit often rests on growth of the ecosystem and on the work of identifiable teams.
“Despite what the SEC has said in the past, most crypto assets are not securities. But confusion over the ‘Howey test’ has led some innovators to by default treat all crypto assets as such,” Atkins said in July.
“Market participants have expressed concern that the Howey test, as the Commission has applied it, is a complex analysis that can be difficult to apply consistently,” noted Peirce in February.
While Atkins has not suggested scrapping Howey, he has argued that the commission should publish clear rules so issuers and platforms can tell whether a token is a security, a commodity-like asset or a digital collectible. He has also recently pushed an “innovation exemption” that would give temporary relief for new projects while crypto-specific rules are written. On October 8, he said the commission is aiming to have the exemption in place by the end of the year.
The closures of long-running cases against major exchanges and market makers give the largest platforms room to operate. That lets compliance teams plan against written rules rather than ongoing litigation, and it brings more predictability to day-to-day decisions. As a result, listings, custody arrangements and market-making can move on clearer timetables, and the legal overhang begins to fade.
With SAB 121 rescinded and cash-only ETF flows replaced by dealings in kind, banks and broker-dealers can handle custody and the delivery or receipt of the underlying coins in ETF creations and redemptions.
As so many headline lawsuits initiated under Gensler were caused due to the application of the Howey test, a narrower use of the rule should reduce fights over whether a token is a considered a security.
It has become clear that Atkins’s commission will continue to establish new laws, rather than prioritize enforcing the current, often ill-suited, standards on crypto companies. The task force will use the input and conclusions from its roundtables to draft these rules.
What is certain is the SEC’s actions this year have marked a major step toward cryptocurrencies’ treatment as a serious asset class in global markets.
