SEC vs. Crypto: Latest Enforcement Actions and How to Stay Compliant

In the ever-evolving landscape of cryptocurrency regulation, the Securities and Exchange Commission (SEC) has been a dominant force shaping the industry’s legal boundaries. However, 2025 has marked a significant shift in the regulatory approach, creating both new opportunities and compliance challenges for crypto businesses. This article examines the latest SEC enforcement actions, analyzes emerging regulatory trends, and provides practical guidance for staying compliant in this dynamic environment.

The Changing Face of SEC Crypto Enforcement

From Enforcement to Engagement: A Policy Shift

The SEC’s approach to cryptocurrency regulation has undergone a remarkable transformation in 2025. Under the previous administration, the Commission pursued an aggressive “regulation by enforcement” strategy, initiating 125 cryptocurrency-related enforcement actions between April 2021 and December 2024, resulting in $6.05 billion in penalties.

However, January 2025 marked a pivotal shift with the formation of the SEC’s Crypto Task Force, dedicated to developing a comprehensive and clear regulatory framework for digital assets. This new approach was crystallized in February when Acting Chairman Mark T. Uyeda made a telling statement while announcing the dismissal of the SEC’s case against Coinbase:

“For the last several years, the Commission’s views on crypto have been largely expressed through enforcement actions without engaging the general public. It’s time for the Commission to rectify its approach and develop crypto policy in a more transparent manner.”

This policy shift has resulted in the dismissal of several high-profile cases, including those against Coinbase, Ripple, and Kraken, signaling a move away from enforcement as the primary regulatory tool toward a more collaborative approach to policy development.

Recent Enforcement Actions: Where the SEC Is Still Active

Despite this shift, the SEC continues to pursue cases involving clear fraud and investor harm. In April 2025, the Commission charged Ramil Palafox and his company PGI Global with orchestrating a $198 million crypto asset and foreign exchange fraud scheme. According to the SEC’s complaint, Palafox misappropriated more than $57 million in investor funds to purchase luxury items and operated a Ponzi-like scheme until its collapse in late 2021.

Laura D’Allaird, Chief of the SEC’s new Cyber and Emerging Technologies Unit, emphasized that the Commission remains vigilant against fraudulent activities: “Palafox used the guise of innovation to lure investors into lining his pockets with millions of dollars while leaving many victims empty-handed. In reality, his false claims of crypto industry expertise and a supposed AI-powered auto-trading platform were just masking an international securities fraud.”

This case demonstrates that while the SEC’s overall approach has evolved, it maintains a strong focus on protecting investors from fraudulent schemes, particularly those involving misrepresentations, misappropriation of funds, and Ponzi-like payment structures.

Landmark Cases and Legal Precedents

The Terraform Labs Decision: A Cautionary Tale

One of the most significant legal precedents in recent crypto regulation came from the SEC’s case against Terraform Labs. The company, which developed the algorithmic stablecoin TerraUSD (UST) and governance token LUNA, faced SEC charges after its collapse in May 2022 erased approximately $40 billion in market value.

Applying the Howey Test, the SEC successfully argued that LUNA and UST constituted investment contracts because investors purchased these tokens expecting profits from Terraform’s management and technological efforts. A jury found Terraform and its founder Do Kwon liable, resulting in over $4.5 billion in disgorgement, prejudgment interest, and civil penalties – the SEC’s largest trial-related remedies.

This case remains significant even in the current regulatory environment as it established that algorithmic stablecoins and related governance tokens can be classified as securities under certain circumstances, particularly when their value depends heavily on the efforts of a centralized team.

The Coinbase Dismissal: A New Direction

In stark contrast to the Terraform case, the SEC’s February 2025 dismissal of its enforcement action against Coinbase signaled a dramatic shift in approach. The Commission had previously charged Coinbase with operating as an unregistered securities exchange, broker, and clearing agency, claiming that certain crypto assets listed on the platform were securities under the Howey Test.

The dismissal, citing the pending work of the Crypto Task Force, marked a turning point in how the SEC approaches crypto regulation. Importantly, the Commission noted that its “decision to exercise its discretion and dismiss this pending enforcement action rests on its judgment that the dismissal will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action.”

This distinction is crucial for crypto businesses to understand – the dismissal does not necessarily indicate that the underlying legal theories have been abandoned, but rather that the SEC is prioritizing regulatory clarity over enforcement in certain contexts.

New Regulatory Guidance and Frameworks

Mining Activities Guidance

In March 2025, the SEC Staff published a significant clarification regarding cryptocurrency mining activities. The guidance determined that crypto mining generally does not implicate securities laws, stating that Proof-of-Work Mining Activities “do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Securities Exchange Act.”

This determination recognizes that computational resources devoted to proof-of-work mining represent efforts of the miner rather than “efforts of others” under the Howey Test, while pool operators’ activities are considered administrative rather than managerial. This guidance provides valuable clarity for mining operations and pool participants, removing a significant regulatory uncertainty.

Staff Accounting Bulletin 122

Another significant development came in January 2025 when the SEC rescinded Staff Accounting Bulletin 121, which had required companies safeguarding crypto assets to record them as liabilities on their balance sheets. The new SAB 122 restores traditional treatment of custodied assets as off-balance-sheet items, removing a key obstacle for regulated entities seeking to participate in crypto markets.

This change is expected to increase institutional participation in the crypto ecosystem by making it more feasible for banks and financial institutions to offer crypto custody services without adverse accounting implications.

Commissioner Peirce’s Framework

In February 2025, SEC Commissioner Hester Peirce issued a statement proposing a four-part framework to categorize crypto assets and solicited public input to clarify how securities laws should apply to digital assets. While not yet formalized, this proposal signals an openness to regulatory reform and may eventually lead to a conditional exemptive order for firms using blockchain for securities.

Common Compliance Failures and How to Avoid Them

1. Unregistered Securities Offerings

Failure Pattern: Issuing tokens without proper registration or exemption remains a significant compliance risk, with 58% of 2024 enforcement actions alleging unregistered securities offering violations.

Compliance Strategy:

• Conduct thorough securities law analysis before any token issuance
• Consider seeking appropriate exemptions (e.g., Regulation D, S, A+)
• Document legal reasoning for token classification decisions
• Consult with specialized legal counsel on token design and distribution

2. Misrepresentations and Disclosure Failures

Failure Pattern: False or misleading statements about token functionality, company operations, or investment returns were central to 73% of 2024 enforcement actions alleging fraud.

Compliance Strategy:

• Implement rigorous review processes for all marketing materials
• Avoid promises of guaranteed returns or price appreciation
• Clearly disclose all material risks and limitations
• Maintain documentation supporting all public claims
• Regularly update disclosures as circumstances change

3. Market Manipulation

Failure Pattern: Artificial trading activity to create false impressions of market interest has drawn increasing attention from both the SEC and Department of Justice.

Compliance Strategy:

• Implement robust policies against wash trading and other manipulative practices
• Deploy monitoring systems to detect suspicious trading patterns
• Maintain clear separation between market making and proprietary trading
• Establish clear policies for employees regarding trading in listed tokens
• Conduct regular audits of trading activities

4. Inadequate Compliance Programs

Failure Pattern: Lack of robust compliance infrastructure for crypto operations underlies many enforcement actions against exchanges and broker-dealers.

Compliance Strategy:

• Develop comprehensive written supervisory procedures specific to crypto
• Implement appropriate AML/KYC procedures
• Establish clear responsibility for compliance oversight
• Conduct regular training for all staff on compliance requirements
• Perform periodic independent reviews of compliance programs

5. Custody and Asset Handling Issues

Failure Pattern: Improper handling of customer crypto assets creates significant regulatory and operational risks.

Compliance Strategy:

• Maintain strict separation between customer and operational funds
• Implement robust security measures for private keys
• Consider qualified custodian arrangements where appropriate
• Maintain transparent records of all customer assets
• Conduct regular audits of asset holdings

Risk Assessment Framework for Crypto Companies

High-Risk Activities (Most Likely to Trigger Enforcement)

1. Making specific promises of investment returns
2. Operating centralized exchanges without proper registrations
3. Conducting token sales without securities analysis or exemptions
4. Engaging in or facilitating market manipulation
5. Misrepresenting material facts about tokens or operations

Medium-Risk Activities (Potential Regulatory Scrutiny)

1. Operating DeFi protocols with significant centralized control
2. Listing tokens that might be considered securities
3. Providing staking services with revenue-sharing models
4. Operating as a broker or dealer in crypto without registration
5. Inadequate disclosure of risks and conflicts of interest

Lower-Risk Activities (Less Likely to Trigger Enforcement)

1. Mining operations (per recent SEC guidance)
2. Developing truly decentralized protocols
3. Trading established cryptocurrencies classified as commodities
4. Providing technology services without handling customer funds
5. Educational and informational services about crypto

Strategic Compliance Recommendations

1. Documentation and Disclosure Strategy

Maintaining comprehensive records of compliance decisions is essential in the current regulatory environment. Companies should document legal analysis supporting token classifications, implement clear risk disclosures, and regularly update these disclosures as the regulatory landscape evolves. Obtaining legal opinions for significant decisions provides an additional layer of protection.

2. Governance and Control Framework

Establishing board-level oversight of crypto compliance demonstrates commitment to regulatory adherence. Implementing segregation of duties for financial operations, conducting regular third-party audits, developing clear policies for handling customer assets, and creating whistleblower mechanisms all contribute to a robust compliance framework.

3. Monitoring and Adaptation System

The rapidly evolving nature of crypto regulation requires constant vigilance. Companies should stay informed about regulatory developments, participate in industry associations, regularly review and update compliance programs, monitor enforcement actions for emerging patterns, and conduct periodic risk assessments.

4. Engagement Strategy

Rather than avoiding regulatory attention, companies should consider proactive engagement through participation in SEC public comment processes, industry associations, and maintaining open dialogue with legal and compliance experts. Documenting all regulatory interactions provides valuable evidence of good-faith compliance efforts.

Looking Ahead: The Future of SEC Crypto Regulation

The current regulatory environment represents a transitional period as the SEC works to develop a more comprehensive framework for digital assets. The Presidential Working Group on Digital Asset Markets is expected to propose a federal regulatory framework by July 21, 2025, which may significantly impact the SEC’s approach.

Companies should remain vigilant, as the current policy shift could evolve further with changing political landscapes. The five-year statute of limitations on SEC enforcement means that current activities could face scrutiny under future administrations with different priorities.

However, the trend toward greater regulatory clarity provides an opportunity for legitimate crypto businesses to operate with more certainty. By implementing robust compliance programs, maintaining thorough documentation, and staying informed about regulatory developments, companies can navigate this evolving landscape while minimizing regulatory risks.

Disclaimer

This article is for informational purposes only and does not constitute legal, financial, or investment advice. The information presented reflects the regulatory landscape as of May 2025 but may change without notice as regulations and enforcement priorities evolve.

The analysis of SEC enforcement actions and regulatory guidance is based on publicly available information and should not be relied upon as definitive legal interpretation. Each situation is unique, and what constitutes compliance for one entity may not be sufficient for another based on specific facts and circumstances.

Readers should consult with qualified legal counsel familiar with securities laws and cryptocurrency regulation before making decisions related to cryptocurrency activities or implementing compliance programs. No attorney-client relationship is created by reading this article.

The author and publisher are not responsible for any actions taken based on the information contained in this article. Cryptocurrency investments and operations involve significant risks, including regulatory risks, and may not be suitable for all individuals or entities.

Laws, regulations, and enforcement priorities cited in this article may have changed since publication. It is the reader’s responsibility to verify the current regulatory status before engaging in any cryptocurrency-related activities.