SEC May Pause Multiple Crypto Lawsuits Awaiting Regulatory Clarity

Key Takeaways

• The SEC has paused a lawsuit against Binance, raising hopes that other similar securities suits would be paused.
• The agency filed numerous suits against crypto companies under Gary Gensler.
• Coinbase, Kraken and Ripple have been fighting similar suits against the SEC.

Earlier in February, the Securities and Exchange Commission (SEC) and Binance filed a joint petition to pause the ongoing securities lawsuit.

The petition cited the formation of the new crypto task force and anticipated regulatory clarity, especially around crypto security vs. commodity status.

The lawsuit pause against Binance has heightened the chances of other similar securities lawsuits against crypto companies being paused that were filed under the previous Gary Gensler-led agency.

Trump Administration Aims To Resolve Regulatory Dilemma

Despite numerous calls from crypto stakeholders and policymakers, the SEC under Gensler was often accused of power overreach and reluctant to offer crypto regulatory clarity.

Gensler-led Agency filed over a hundred lawsuits against crypto companies for violating securities laws they were asking for clarity on. 

As a result, several founders of crypto companies have appealed to the Trump administration to throw out bogus lawsuits against crypto companies, tying them in litigation complexities and adding additional costs of legal troubles. 

The Trump-appointed crypto task force, headed by pro-crypto SEC commissioner Hester Peirce, has to develop much clearer regulations by the end of the year.

A lot depends on the regulatory framework and which crypto assets fall under the classification of securities or commodities.

The temporary pause of a lawsuit against Binance under the Trump-appointed interim SEC chief is the first sign of changing times for crypto companies. Market experts believe that the agency might pause several similar lawsuits until more clarity on crypto regulations comes in.

Crypto Lawsuits Facing a Pause

SEC vs. Ripple

The SEC lawsuit against Ripple, filed in December 2020, was one of the first to begin the security dilemma for crypto firms. The lawsuit accused Ripple of selling security tokens without registering with the agency, alleging XRP sales were securities violations.

After four years of court battles, the judge determined that selling XRP to retail customers doesn’t violate securities law, giving Ripple a significant victory.

The judgment also became key to several similar lawsuits and forced the SEC to change its definition of crypto security.

However, the judge also ruled that the sale of XRP to institutional investors fell under security and imposed a multimillion-dollar fine on Ripple. The lawsuit is in its appeal phase, where both parties have appealed the judgment against them.

SEC vs. Coinbase

The SEC lawsuit against Coinbase is built on similar grounds, where the agency accused the American exchange of offering securities and deemed its staking services illegal.

The suit, filed in June 2023 , accused the firm of operating an unregistered securities exchange, broker and clearing agency for years.

Coinbase is fighting the SEC on multiple fronts, having filed a lawsuit against the agency for not offering more precise crypto guidelines.

The suit against Coinbase is based on securities violation charges, and it might be paused while the Hester Peirce-led task force works on better regulatory clarity.

SEC vs. Kraken

The SEC filed securites violation charges against Kraken in November 2023 for operating a crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency.

Kraken claimed the SEC had not provided adequate guidance on how its activities might violate securities laws.

The security agency also shut down Kraken’s staking services in the U.S. and imposed a $30 million fine. Still, the exchange has re-opened its staking services under the Trump administration.

SEC vs. Bittrex

In April 2023, the SEC charged Bittrex , its co-founder and former CEO William Shihara, with operating an unregistered national securities exchange, broker and clearing agency. 

The SEC also charged Bittrex’s foreign affiliate, Bittrex Global GmbH, for failing to register as a national securities exchange in connection with its operation of a single shared order book along with Bittrex.

The suit is similar to the ones against Kraken, Coinbase and others, and might be included in the list of lawsuits that will be paused until clearer regulations are issued.

SEC vs. Genesis and Gemini

The SEC charged Genesis Global Capital LLC and Gemini Trust Company, LLC with the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.

The SEC’s lawsuit alleges the lending programs offered by the platform violated securities law. However, the new administration is considering offering more clarity on lending businesses as well, and until then, the suit might get paused like several others.