SEC Cryptocurrency Enforcement Reaches Record High in 2023

News | March 5, 2024 By:

The U.S. Securities and Exchange Commission (SEC) significantly increased cryptocurrency enforcement actions in 2023 according to recent data. SEC cryptocurrency-related activities jumped over 50% compared to 2022, with 46 enforcement actions targeting 124 individuals and companies.

Whether cryptocurrency falls under existing securities law remains controversial. SEC Chair Gary Gensler believes most cryptocurrencies meet the criteria of an investment contract under the Howey test. However, recent court cases show the complexity of determining if a cryptocurrency is a security. Some federal judges have questioned why there is no tailored cryptocurrency regulation.

During proceedings involving the SEC against Binance and Coinbase, judges voiced concerns about assessing cryptocurrencies on a “case-by-case” basis rather than definitive rules. Both Judge Amy Berman Jackson and Judge Katherine Polk Failla noted the lack of congressional or judicial clarity on what qualifies as a security. Many crypto advocates want uniform rules rather than litigation.

Despite calls for new legislation, the SEC claims existing law suffices for now. Most 2023 actions involved fraud and unregistered securities offerings. Two cases centered on non-fungible tokens (NFTs), deemed investment contracts under Howey. Fines totaled $281 million, bringing overall penalties to $2.89 billion since 2013.

While the SEC actively enforces current statutes, the proper regulatory framework remains unsettled. Courts will further define applicable law as litigation progresses. The lack of transparent rules frustrates many in the cryptocurrency industry who seek regulatory certainty rather than compliance through enforcement actions. Going forward, judicial opinions will provide clarity around these open legal questions.