SEC Crypto Crackdown Declines Under Gensler, Report Finds

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SEC reduces crypto enforcement actions, imposing record penalties as new leadership hints at regulatory changes - IcoHolder.

The U.S. Securities and Exchange Commission (SEC) scaled back its crypto enforcement actions by 30% in the final year under former Chair Gary Gensler, according to a new report by Cornerstone Research. The agency initiated 33 crypto-related actions in 2024, a sharp drop from the record 47 cases brought in 2023.

Enforcement Slows but Penalties Reach New Heights

Despite the decline in enforcement actions, the SEC imposed a record $5 billion in monetary penalties on crypto industry participants last year. The lion’s share of this figure came from a $4.5 billion settlement with Terraform Labs. Overall, the SEC charged 90 defendants, including 57 individuals and 33 firms, in its crypto-related cases.

Administrative proceedings also dropped significantly, falling by more than 50% compared to prior years. However, Cornerstone noted that enforcement activity spiked in September and October of 2024, with over half of the year’s actions initiated in those two months. Only four enforcement actions were filed after the November elections, reflecting a slowdown amid the transition to a new administration.

Fraud and Unregistered Securities Top Allegations

Fraud allegations were the most common in SEC crypto cases, cited in 73% of actions in 2024, followed by unregistered securities offerings at 58%. The regulator also increased its focus on market manipulation and failures to register as broker-dealers, underscoring its broader effort to police the fast-evolving crypto industry.

Since 2013, nearly half of the SEC’s 207 crypto enforcement actions have targeted initial coin offerings (ICOs) and non-fungible tokens (NFTs). Under Gensler’s tenure, which began in 2021, the SEC pursued nearly 80% more crypto-related cases than during Jay Clayton’s term from 2017 to 2020.

Leadership Shift Signals Policy Changes

Gensler stepped down as SEC chair on January 20, coinciding with President Donald Trump’s inauguration. His successor, acting Chair Mark Uyeda, has already signaled a shift in the agency’s approach to crypto regulation. On January 23, the SEC rescinded Staff Accounting Bulletin No. 121, a controversial rule that required financial firms holding cryptocurrencies to record them as liabilities.

Observers have noted that Gensler’s aggressive enforcement style created challenges for crypto firms in the U.S. “The SEC under Gensler made the regulatory landscape nearly untenable for many in the crypto industry,” said a source familiar with the sector.

As the SEC recalibrates under new leadership, the agency's future direction will play a pivotal role in shaping the U.S. crypto market. With the shift in priorities, market participants are hopeful for a regulatory framework that balances innovation with investor protection.