Crypto Regulation Moves Forward as SEC Crypto Task Force Hosts Roundtables and Names New Leadership

The Securities and Exchange Commission (SEC) announced the establishment of a new Crypto Task Force on February 4th, 2025. Their role is to apply federal securities laws and protect investors from fraudulent activities within the crypto asset market. A month later, on March 3rd, 2025, the SEC announced the members that comprise the Crypto Task Force staff as advisors on the matter of crypto. The creation of this task force is intended to be less risky and provide more regulatory clarity compared to the previous Crypto Task Force. The SEC has changed course with the new administration. Gary Gensler, appointed under President Biden, as the Chair of the SEC, was known for going after crypto firms with enforcement actions. Mark T. Uyeda is now serving as Acting Chairman of the SEC following Gary Gensler’s resignation, until Paul Atkins, Donald Trump’s appointee is sworn in. Since the change in administration, the SEC has withdrawn or paused several cases against cryptocurrency firms, including Robinhood, Coinbase, Gemini and Kraken. However, in a public statement from SEC Commissioner Hester Pierce, who serves the chair of the Crypto Task Force, Pierce emphasized that the SEC will still be going after “liars, cheaters, and scammers.”

What is the SEC’s Crypto Task Force?

The SEC’s Crypto Task Force was created to advise the commission on matters regarding Crypto. Specifically, they were designed “to provide clarity on the application of the federal securities laws to the crypto asset market” and recommend policy measures for innovation and investor protection. The assets that are in the scope of this task force include digital assets, crypto assets, cryptocurrencies, digital coins, tokens, and protocols.

On February 4th, the new SEC Crypto Task Force was established. According to Commissioner Hester M. Peirce, the previous Crypto Task Force was risky, inefficient, and slow, there was a lack of clear direction and overemphasis on enforcement. The new task force hopes to solve these issues and setbacks with a less risky approach and greater regulatory clarity by working with the public on this journey.

SEC Disclaimers

1. Although Commissioner Peirce is charged with leading the Crypto Task Force, the views he expressed are his own and may not be the same as those of the SEC or other commissioners.
2. It will take some time to detangle all the actions related to crypto that were going on under the previous Crypto Task Force. This includes the ongoing litigation, rules that are still in the proposal stage, and the market participants that “remain in limbo.” So, it is advised to be patient.
3. The Crypto Task Force wants to develop a regulatory framework where individuals have greater freedom to experiment and build. They want to foster greater investor protection and will combat cryptocurrency fraud.
4. The task force will create a regulatory framework that includes protecting investors and preserving industries’ ability to offer products and services. There is flexibility; however, there are also rules and compliance requirements set by Congress that the commission will apply to market participants.
5. There is a high volume of applications for exemptive relief, requests for no-action letters, and registrations. This application process will be more efficient if there is adherence to legal and technical requirements and if it is well prepared.
6. The Commission does not endorse any product or service, including coins or tokens. Individuals may choose to buy at their own discretion and should understand the risks if things go poorly.

Legal Action in Crypto Law

The following cases serve as examples of litigation in the crypto world.

1. In SEC v. Terraform Labs PTE, Ltd. and Do Hyeong Kwon, No. 23-cv-1346-JSR (S.D.N.Y.), Terraform and Kwon were involved in fraud involving crypto asset securities by offering and selling crypto asset securities in unregistered transactions that led to the loss of at least $40 billion of market value, including devastating losses for U.S. retail and institutional investors. Defendants repeatedly claimed the tokens would increase in value and flaunted their managerial and entrepreneurial efforts to do so. Defendants also made misrepresentations to investors about the Terraform blockchain and its crypto asset securities, boasting that a popular Korean electronic mobile payment application employed the blockchain. Defendants also misled investors about the stability of Terraform’s offering, the UST, which they claimed was pegged to the U.S. dollar, despite several instances where it dropped below $1.00. On June 12, 2024, the U.S. District Court for the Southern District of New York approved a final consent judgment against Terraform and Kwon. Terraform owes $4,473,828,306 in payments, which will be distributed to investors and creditors. Kwon needs to transfer a minimum of $204,320,196 to the Terraform bankruptcy estate for distribution to the harmed investors.
2. In SEC v. Ripple Labs, the SEC stated that Ripple Labs Inc. and two of its executives amassed over $1.3 billion through their unregistered digital asset securities offering, XRP, violating Section 5 of the Securities Act. The SEC argued that the sale of digital assets known as XRP was used to raise funds in unregistered securities and was being offered to investors, violating securities law. The complaint also alleged that Ripple distributed billions of XRP in exchange for services such as labor and market making as well as failing to provide essential investor disclosures. On July 13, 2023, on cross motions for summary judgment, the U.S. District Court for the Southern District of New York issued its final judgment and remedies order. The court ruled that XRP, itself was not a security but that institutional sales, direct sales to institutional investors totaling $728 million, were, in fact, unregistered securities offerings. On the other hand, programmatic sales, which are secondary sales on crypto exchanges, did not meet the same criteria. The district court rejected the SEC’s disgorgement theory, finding that the SEC failed to show that any investor was harmed by Ripple’s sale of XRP, applied a transaction-by-transaction approach to calculate a civil penalty for violations of the registration provision of the securities laws which totaled $125,035,150 (versus the SEC’s requested fine of $876,308,712), and issued an injunction barring Ripple from future violations of Section 5 of the Securities Act and rejected Ripple’s request to waive the “bad actor disqualification”, which will prevent Ripple from using the SEC’s Regulation D exemption for future securities offerings for five years. The SEC filed an appeal with the 2nd Circuit on October 15, 2024. In the SEC’s opening brief, they argued the district court erred in concluding that XRP’s programmatic sales did not constitute an unregistered securities offering. However, since March 20, 2025, the SEC has dropped its appeal, which is likely a result of the shift in SEC leadership and strategy.

Eyes will be on the SEC to answer the open questions remaining as cryptocurrency continues to become more prevalent.

The Role of Whistleblowers at the SEC

The SEC whistleblowers report securities law violations in order to maintain the integrity of financial markets. The Dodd-Frank Wall Street Reform and Consumer Protection Act is also given to SEC whistleblowers, which allows any individual who reports a potential securities law violation to the SEC to be protected from retaliation by their employer. The Securities Exchange Act also encourages individuals to come forward by offering incentives such as monetary rewards for voluntarily providing them with information.

Here is What you Can Do if you Suspect Crypto Fraud

First Document the Evidence 

Keep a record of any evidence that points to fraud.

Then Report the Fraud 

You can report crypto fraud to the Securities Exchange Commission.

Next File a Whistleblower Lawsuit 

Under the FCA’s qui tam provision, private citizens can file lawsuits on behalf of the government.

Finally Seek Legal Counsel 

Consult with an attorney who specializes in whistleblower cases to guide you through the process.