SEC’s Crypto U-Turn: All Gensler-Era Enforcement Actions Dropped So Far

Key Takeaways:

The SEC rolled back more than half a dozen enforcement actions in the last four weeks. Cases against Coinbase, Kraken, Gemini, Consensys, Robinhood, Yuga Labs, and others have either been dropped or paused. Experts welcome the SEC’s new approach saying it “fosters collaboration rather than confrontation.”

The U.S. Securities and Exchange Commission (SEC) under acting Chair Mark Uyeda is rolling back a barrage of enforcement actions brought against several cryptocurrency companies under the leadership of Gary Gensler.

The reversals are in line with promises Donald Trump made to the sector on the campaign trail. He promised to fire former SEC Chairman, Gensler, on his first day in office, and to improve the regulatory environment.

Under Gensler, the Securities and Exchange Commission brought a record number of enforcement actions against crypto firms, with up to 83 lawsuits targeting the likes of Kraken, Coinbase, and Robinhood.

The charges are mostly related to tokens operating as securities, meaning they must comply with SEC regulations. Gensler’s SEC even notoriously pursued tokens and NFTs with real-world use cases outside speculation.

During his three years in office, Gensler’s tenure was responsible for 50% of the enforcement actions taken by the SEC against the cryptocurrency industry since 2015, according to crypto venture firm Paradigm.

Gensler’s aggressive style made him one of the most hated people in crypto. His strategy was often criticized as “regulation by enforcement,” even by some of his peers like Hester Peirce. But that is starting to change.

Acting SEC Chair Mark Uyeda is leading efforts to dismantle a lot of the Gensler-era excesses. In the six weeks since Trump’s inauguration as U.S. President, the regulator has dropped or paused multiple enforcement actions against crypto companies.

Here’s a list of some of the most notable cases that the SEC has reversed and what this could mean for the cryptocurrency industry going forward.

Coinbase vs SEC: Weaponizing Ambiguous Laws

The SEC agreed to drop its enforcement action against Coinbase, the largest crypto exchange in the United States. The decision is subject to approval from the agency’s Commissioners.

The case, which started in 2023, involved allegations that Coinbase operated as an unregistered securities exchange, broker, and clearing agency, and offered unregistered securities through its staking program.

Coinbase CEO Brian Armstrong welcomed the dismissal, saying he has been “vindicated.” He accused Gensler’s SEC of “exceeding its authority” by “asking us to delist a number of assets that were not securities.”

“We had taken a conservative approach to ensure we weren’t listing any securities, and the SEC itself had allowed us to go public in 2021 after reviewing our listing standards in depth,” Armstrong wrote on X.

“We tried to ‘come in and register’ but it turned out it was a fake offer, as every crypto company discovered. Regulators are supposed to enforce the law, but they can’t make up new laws on the spot if they don’t like the current ones, or weaponize a lack of clarity in the law.”

Robinhood Investigation

The SEC formally closed its investigation into the cryptocurrency arm of financial services firm Robinhood on Feb. 21. The regulator decided against pursuing enforcement action against the company.

Dan Gallagher, chief legal and compliance officer of Robinhood Markets, Inc., said of the decision:

“Let me be crystal clear—this investigation never should have been opened. Robinhood Crypto always has and will always respect federal securities laws and never allowed transactions in securities.”

The SEC launched its probe into Robinhood in 2024, telling the company’s crypto asset division via a Wells Notice that it would likely face regulatory consequences for allegedly selling securities.

Kraken vs SEC: ‘Regulation by Enforcement Has Failed’

As Cryptonews recently reported, the Securities and Exchange Commission has agreed in principle to dismiss its lawsuit against cryptocurrency exchange Kraken.

In a statement, Kraken said the case will be dropped “with prejudice,” meaning it cannot be refiled. The crypto exchange will not admit to any wrongdoing, pay penalties, or change its business operations, it said.

The SEC sued Kraken in November 2023, claiming that it operated as an unregistered securities exchange, broker, clearing agency, and dealer. The regulator also accused the company of commingling customer and corporate funds. Kraken challenged the charges, but a federal judge ruled that the case warranted a full trial.

“The SEC’s lawsuit, which mischaracterized our consistent business model, was always without merit,” Kraken said in a Mar. 3 blog post announcing the dismissal.

Posting on X, Kraken co-CEO Dave Ripley, said:

“Regulation by enforcement has failed, and we will not allow it to define the next chapter of this industry. Regulation should be protecting consumers, not punishing pioneers.”

Consensys Case

Joseph Lubin, CEO of crypto software developer Consensys, announced on Feb. 27 that the SEC had agreed in principle to dismiss its securities enforcement case against MetaMask, the cryptocurrency wallet.

The dismissal needs approval from the Commissioners, he said, noting that the agency “will file a stipulation with the court that effectively closes the case.”

“We were committed to fighting this suit until the bitter end but welcome this outcome,” Lubin posted on X.

“No company wants to be the target of agency enforcement, but…it was our duty and honor to stand up for blockchain software developers in the hour it was most needed…”

The SEC sued Consensys over its crypto wallet, MetaMask, in June 2024. The agency accused the San Francisco-based company of operating as an unregistered broker of securities while collecting $250 million in fees through products like its staking programs.

Cumberland DRW Case, OpenSea, and Others

Crypto market maker Cumberland DRW agreed with the SEC to dismiss the lawsuit brought by the regulator in October 2024. Like many other such deals, the dismissal is subject to approval by the Commissioners.

The SEC sued Cumberland on allegations that it was trading in securities without a broker-dealer license, citing $2 billion in transactions. Some of the tokens labeled by the SEC as securities at the time include Solana, Polygon, Cosmos Atom, and Filecoin.

The Cumberland case is interesting in that while most SEC enforcement actions focused on the cryptocurrency industry, this one spanned the traditional financial (TradFi) sector.

Meanwhile, the SEC has also closed several investigations that had not yet reached the litigation stage. It includes the ones targeting OpenSea, the largest NFT marketplace, decentralized exchange Uniswap, Bored Ape NFT creator Yuga Labs and Gemini.

One of the major outstanding cases is that of Ripple, the issuer of the XRP crypto token. Some media reports suggest the case is pending because there has already been a judgment, making it more complicated.

A previous U.S. court ruling said XRP was not a security when sold on exchanges. The SEC has challenged the ruling.

What It Means for Crypto

Under acting Chairman Uyeda, the Securities and Exchange Commission appears to be prioritizing the creation of clear guidelines over aggressive enforcement actions, as the case was during the tenure of Gary Gensler.

A new task force has been set up to develop rules for the crypto sector. As Commissioner Hester Peirce noted, “Enforcement is an important tool for the SEC, but it’s not the right tool for crafting policy.”

Slava Demchuk, CEO of blockchain forensics and compliance company AMLBot, said the change in the SEC’s approach is “indicative of a more predictable and supportive regulatory landscape.”

Speaking to Cryptonews, Demchuk said:

“Crypto businesses can worry less about sudden enforcement actions, allowing them to focus on innovation, product development, and market expansion within the U.S. This welcoming and collaborative attitude could also encourage greater institutional participation.”

Demchuk believes the shift could position the U.S. “as a global leader in the digital economy,” stating:

“By fostering collaboration rather than confrontation, the SEC could help retain innovative projects that might have otherwise fled to jurisdictions like the EU, which has already implemented its Markets in Crypto-Assets (MiCA) framework.”

Hedi Navazan, chief compliance officer at DeFi protocol 1inch, said, “The SEC’s decision to step back from aggressive litigation reflects an evolving perspective on how to regulate the rapidly expanding crypto industry.”

“Regulation by enforcement was a misguided and flawed strategy,” Navazan told Cryptonews, adding:

“It’s akin to treating a child by only punishing them for mistakes, without offering guidance or explaining what was expected of them and why. It leaves the parties involved in the dark, making it difficult to make informed decisions and plan for the future.”

Navazan praised the agency’s new roundtable discussions and “sprinter” sessions as “vital for developing sound, comprehensive regulatory frameworks that support innovation.”

The sessions are meant to foster dialogue between regulators and the private sector, with the first roundtable set for March 21.

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