crypto financing

SEC vs Crypto: Major Legal Battles That Shaped the Industry

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a decade, the SEC has argued that many crypto projects are skirting securities laws, while the crypto industry claims outdated rules unfairly target it.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.

Posted by Laney Seward in Cryptocurrency

Crypto Financing, Is It Possible?

If you have a smart business idea, you have to convince investors of your vision. In the beginning, it is often family and friends. You could be even seeking financial help from a lending club or traditional banks. Later, ideally, business angels and investors come in who provide venture capital. A time-consuming process.

The Top Crypto-Backed Loan Platforms

Now, there’s what is called crypto lending as explained by Cointelegraph. It works much like a regular loan but within the limitations of cryptocurrencies. This service connects willing lenders to seeking borrowers using online platforms. Lenders lend their Altcoins, Ether, or Bitcoins to borrowers under agreed terms and regulations.

The entrepreneur Zoe Adamovicz can imagine it all easier, faster, and cheaper. With her start-up “Neufund”, the Polish-born artist, together with her partner Marcin Rudolf, wants to create a platform on which investors can participate in start-ups using the Ethereum cryptocurrency. It is an experiment that no one can say at the moment whether it will succeed and what risks are involved for the investor. Bafin’s financial supervision is in the process of dealing with this business model.

The company is financed through venture capital. It recently mobilized $ 12 million from investors for the platform. The financiers include, for example, the investor Frank Thelen, who is known to a wider audience as a jury member of the start-up show “Höhle der Löwe”. Neufund has dubbed this process the “Initial Capital Building Mechanism” (ICBM). Supporters, therefore, commit funds that they can later invest on the platform in companies.

Adamovicz and Marcin are experienced entrepreneurs. In 2014, they sold their self-founded Xyo app search engine to an American, listed company. It is important for the manager to differentiate herself from so-called initial coin offerings (ICO). “New discovery does not make an ICO,” she clarifies. “No euro is used by the ICBM for the company. We don’t manage this money either. ”

She doesn’t want “newfound” to be lumped together with companies that use intransparent ICOs to collect money by issuing tokens. Much can be hidden behind tokens: some companies promise to share in possible future profits, others only declare the collected money as a “donation”. “At the moment, investors who finance companies using cryptocurrencies cannot be sure whether the tokens issued will actually be used for the purposes for which they were announced,” Adamowicz describes the dilemma. This is exactly what is supposed to work differently on the “Neufund” platform.

The ten largest cryptocurrencies

There, companies can finance themselves with so-called equity token offerings (ETOs). Adamowicz wants to ensure that the investor who participates in a company on the Neufund platform also benefits from possible profits or sales proceeds. At the same time, investors have to bear possible losses. “With an ETO, the investor acquires rights to the company, which he can also assert, if necessary,” she emphasizes. This is a big difference to tokens, which are awarded in the context of an ICO.

Posted by Laney Seward in Cryptocurrency, Finance