In space, no one can hear you scream. In cyberspace, the triumphant cheers of crypto companies may be overwhelming. Since the beginning of President Donald Trump's second term in January of 2025, the Securities and Exchange Commission (SEC) has been dropping lawsuits and ending investigations involving the crypto industry.
More of the same is expected as Hester Peirce, whom Trump appointed to the SEC in 2018, was tapped to become the Commissioner of the SEC's new Crypto Task Force. Peirce promises to create a regulatory framework for crypto that fosters "great freedom to experiment and build interesting things" while not becoming "a haven for fraudsters." Whether these ambitious goals can be met remains to be seen.
Changing of the Guard
For decades, the SEC has relied on the Howey Test to determine whether a transaction should be governed by U.S. securities laws. Based on 1946's SEC v. Howey, the test involved applying a series of questions to a transaction to determine if it qualified as an investment contract.
Applying the Howey Test to the new industry of crypto has proven challenging and frustrating to all involved. Given that there's no real comprehensive and clear regulatory framework for crypto assets and companies in place, the industry has complained of unfair treatment in the past.
The dissatisfaction was never more evident than during the Biden administration. SEC Commissioner Gary Gensler was accused of targeting crypto businesses that failed to register with the agency or had questionable practices. This included crypto giants like Coinbase, Robinhood, OpenSea, and Gemini.
Perhaps as a result, the crypto industry was both a vocal and financial backer of Trump's 2024 presidential campaign, with more than $150 million funneled into super political action committees working for his re-election. Viewing Biden's SEC as more focused on enforcement than working with crypto companies, they hailed Trump's campaign promise to fire Gensler.
Crypto industry leaders were consulted before Trump announced the nomination of former SEC Commissioner Paul Atkins to become the chair of the agency. Having a handpicked leader would certainly bode well for the industry. The SEC suffered personnel losses from their crypto team after the inauguration and declared it was now a "cyber and emerging technology unit."
The Future Is Now, Maybe
No longer having to worry about having a Wells Notice show up has surely come as a tremendous relief to the cyber industry. Many cases and investigations that were being pursued by the SEC have been either paused or dismissed, and it's likely few if any will survive.
Peirce insists that the Crypto Task Force will act against any instances of fraud in the industry, pointing out that the creation of a rules framework will make it much easier to identify offenders. Skeptics are much less optimistic, noting that moving away from enforcement may embolden scammers.
With the ongoing hollowing out of the Consumer Financial Protection Bureau (CFPB), there's concern that investors are entering a new era with markedly fewer safeguards. All indicators point to the SEC not regulating memecoins, a type of crypto extremely vulnerable to pump-and-dump schemes. Trump issued a memecoin shortly before his inauguration, which has fallen to less than 20% of its issuance value.
Also unknown is how the SEC would be involved, if at all, with Trump's recent announcement of plans to create a national strategic crypto reserve. Given the complete lack of details on how it would work or if there would be any oversight, it's speculative at this point.
Related Resources
- The Ultimate Guide To Planning Your Digital Estate (FindLaw Estate Planning Basics Resource)
- The Securities and Exchange Commission: Overview (FindLaw's Consumer Protection Law)
- Do I Need To Pay Cryptocurrency Taxes? (FindLaw Federal Tax Laws)
