The clash between the U.S. Securities and Exchange Commission (SEC) and the cryptocurrency industry has defined much of the regulatory landscape for digital assets. For over a decade, the SEC has argued that many crypto projects are skirting securities laws, while the crypto industry claims outdated rules unfairly target it. The result has been a series of legal showdowns that have shaped how crypto is regulated, built, and traded in the U.S. An Orlando lawyer with experience in securities and fintech law may closely watch these developments as the outcomes continue to impact compliance strategies nationwide.
The DAO Report (2017): The Starting Gun
Before the courts got involved, the SEC issued a landmark report 2017 on an Ethereum-based project called The DAO. This decentralized venture capital fund raised $150 million in ether. The SEC didn’t file a lawsuit, but the report was a clear warning: digital tokens that behave like investment contracts could be treated as securities.
The agency leaned on the Howey Test—a legal standard from a 1946 Supreme Court case—to determine whether something qualifies as a security. According to the test, if people invest money in a common enterprise expecting profits from the efforts of others, it’s a security. The SEC concluded that the DAO tokens met those criteria. This report set the tone for years of enforcement.
SEC v. Kik Interactive (2020): First Major Win
Kik, the company behind a popular messaging app, raised $100 million in 2017 by selling its Kin tokens. 2019, the SEC sued, arguing that the sale was an unregistered securities offering. Kik claimed Kin was a currency, not a security.
In 2020, the court sided with the SEC. It found that Kik’s public token sale and marketing of the tokens fit the Howey Test. This case gave the SEC confidence to pursue similar cases and signalled to startups that token launches carried legal risks.
SEC v. Ripple Labs (2020–2023): A Partial Blow
Ripple’s case has been one of the most closely watched in crypto history. In December 2020, the SEC sued Ripple for selling XRP as an unregistered security. In 2023, the court ruled that Ripple broke the law in sales to institutional investors but not to retail buyers on exchanges. The main issue was whether buyers expected profits from Ripple’s efforts.
This nuanced decision undermined the SEC’s broad stance that most tokens are securities. While the case didn’t fully exonerate Ripple, it showed that context matters—and not every token sale fits neatly into the Howey framework.
SEC v. LBRY (2021–2023): A Loss for Crypto
LBRY, a decentralized content platform, was sued for selling its LBC tokens without registering them. In 2022, a judge ruled that LBRY violated securities laws—even though it didn’t hold a formal token sale. The court noted that the company used token sales to fund operations, and buyers reasonably expected profit.
This decision was a setback for crypto. Unlike the Ripple ruling, it didn’t carve out exceptions for retail sales. LBRY ultimately shut down in 2023 after losing its appeal.
SEC v. Coinbase and Binance (2023–ongoing): The Big Guns
In mid-2023, the SEC sued Coinbase and Binance, the world’s two largest crypto exchanges. The agency accused both of operating unregistered securities exchanges and offering tokens that qualify as securities.
These cases aim to answer a bigger question: Do secondary market trades of crypto tokens fall under SEC oversight? If the SEC wins, it could force exchanges to delist dozens of tokens or register as securities platforms—an expensive and uncertain process. So far, both companies are fighting back in court, and no final rulings have been issued. However, the cases are expected to set a precedent.
Beyond the Courts: Regulatory Gridlock
One major issue is that the U.S. still doesn’t have clear legislation defining how crypto should be regulated. The SEC has taken the lead through enforcement, while the Commodity Futures Trading Commission (CFTC) claims authority over crypto commodities like bitcoin.
Congress has introduced several crypto bills, but none have passed into law. This leaves startups and investors guessing what’s allowed and what isn’t. Until a legislative framework is established, the SEC will likely continue regulating through litigation.
The SEC’s battles with the crypto industry have clarified some legal boundaries but left others murky. The courts have shown they’re willing to challenge the SEC’s broad interpretations, but they’ve also upheld the agency’s authority in key areas.
What’s clear is that the crypto industry can’t operate in a legal vacuum. Whether through Congress or the courts, clear rules are coming—eventually. For now, the SEC remains a powerful force, shaping the crypto space one lawsuit at a time.
