Crypto’s Gamble Pays Off: SEC Enforcement Stalls Under Trump Administration

By: Jake Gray

The cryptocurrency industry’s political bet on Trump appears to be paying early dividends in his administration’s first month. The Securities Exchange Commission’s (“SEC”) rapid pivot–reorganizing its enforcement units and pausing major crypto litigation–signals a dramatic shift in the agency’s approach to digital asset regulation.

In the past, we have analyzed several enforcement actions by the SEC against cryptocurrency companies that issued their own tokens. Our analyses of cases such as SEC v. Ripple Labs, SEC v. Kik Interactive Inc., and SEC v. LBRY Inc. examined how the SEC has applied the Howey test to argue that certain cryptocurrencies, based on their economic characteristics, constitute unregistered securities. But those analyses may now be moot.

On February 20, 2025, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU) that is to replace the Crypto Assets and Cyber Unit. The new unit will be led by Laura D’Allaird, who will be working alongside Commissioner Hester Peirce’s Crypto Task Force. Acting Chairman Mark T. Uyeda framed the change as deploying “enforcement resources judiciously” and “clearing the way for innovation,” signaling a retreat from the aggressive enforcement posture that had previously classified most crypto offerings as securities under the Howey doctrine.

This reorganization also coincides with the agency’s decision to pause several high-profile cases against cryptocurrency companies. On February 11, 2025, in a joint motion to stay the case, the SEC and crypto exchange Binance asked a D.C. federal judge overseeing the agency’s enforcement action against the exchange to pause the case for two months while the agency develops a regulatory framework for digital assets. On the heels of that joint motion, on February 14, 2025, the SEC and crypto-exchange Coinbase jointly petitioned the Second Circuit for a 28-day extension in their ongoing litigation, further delaying the SEC’s response to Coinbase’s appeal regarding whether securities laws apply to transactions on its platform. Coinbase was the largest cryptocurrency industry backer of the Trump campaign, with $74.5 million in donations.

Another important candidate for pause or withdrawal is the SEC’s Appeal in its enforcement case against Ripple Labs for alleged unregistered securities offerings through Ripple’s cryptocurrency, XRP. In the landmark ruling, the Southern District of New York judge determined that while Ripple Labs’ institutional sales of XRP violated securities laws, its public exchange sales did not constitute investment contracts–a split decision that marked the first major defeat for the SEC in a cryptocurrency case and prompted Coinbase to announce plans to relist XRP. It’s notable that Ripple Labs donated $48 million to the Trump campaign and that the lead SEC litigator of the Binance, Coinbase, and Ripple cases has been absent from the two recent SEC pleadings.

President Trump also nominated Paul Atkins to be Chairman of the SEC, a former co-chairman of cryptocurrency advocacy group Digital Chamber’s Token Alliance and former SEC Commissioner during the George W. Bush administration. Atkins is also the current CEO of Patomak Global Partners, which, among other things, advises cryptocurrency companies on how to manage risk and maintain compliance as they launch new products. Atkins’s leadership is likely to differ drastically from his predecessor, Gary Gensler, under whom the SEC aggressively pursued enforcement actions against cryptocurrency companies, such as the ones mentioned above, arguing that most digital assets qualified as unregistered securities under federal law per Howey.

These are as hospitable conditions as the cryptocurrency industry could have hoped for to start the administration. However, the industry’s future still hinges on whether the Republican-controlled Congress can pass comprehensive cryptocurrency legislation. Several bills have been proposed in previous sessions, but none have made it to law. With aligned control of Congress and the White House, and a (likely) SEC chairman sympathetic to the industry, cryptocurrency advocates may finally have their best chance to establish a clear regulatory framework that could make case-by-case SEC determinations of what constitutes a security obsolete.