In April 2025, the U.S. Securities and Exchange Commission (SEC) announced that it was dropping a number of securities lawsuits it had previously filed against cryptocurrency projects. This move signaled a sharp policy shift in the SEC’s traditionally hardline stance toward the crypto sector. Under the leadership of Acting Chairman Mark Uyeda, the SEC halted or closed nearly all ongoing crypto-related lawsuits within the past two months. The agency stated that it is using this time to review how securities laws should be applied to digital assets, with the help of a newly formed crypto task force. This development has reignited fundamental debates over the legal classification and regulatory treatment of cryptocurrencies.
What Is a Security?
In U.S. law, the term “security” covers not only traditional instruments like stocks and bonds, but also more flexible arrangements such as “investment contracts.” In the landmark Howey case from 1946, the U.S. Supreme Court defined an investment contract as a transaction where a person invests money in a common enterprise with the expectation of profits derived from the efforts of others.
Are Crypto Assets Securities?
Some regulators argue that many crypto assets resemble equity investments in terms of profit expectations and should thus be treated as securities. For instance, in a 2023 lawsuit against Coinbase, the SEC alleged that popular tokens such as Solana (SOL), Cardano (ADA), and Polygon (MATIC) were unregistered securities.
However, industry representatives counter that these assets are not investment vehicles like stocks, but rather digital commodities or utility tokens used within blockchain ecosystems. Coinbase, for example, argued in court that the crypto assets on its platform do not meet the definition of investment contracts under the Howey test and therefore should not be classified as securities.
An Old Test for a New Technology
The SEC’s strategy of regulating crypto via enforcement actions under existing laws has drawn criticism. Industry participants say that due to the lack of clear rules, even projects seeking compliance do not know what’s allowed. They often receive no guidance from the SEC—only lawsuits once the agency deems a violation has occurred.
Another criticism is that securities laws from the 1930s are ill-suited to decentralized crypto projects. Without a central issuer or administrator, blockchain systems often fall outside the practical and legal scope of old regulations. As a result, many believe that new laws are needed to govern crypto assets.
There is also disagreement over the applicability of the Howey test to digital tokens. The SEC maintains that the 80-year-old test remains valid because it is based on flexible legal principles. In contrast, the crypto industry argues that many tokens do not meet Howey’s criteria and that the test is outdated. They call for new definitions and legal frameworks tailored to the crypto space.
Why Do These Legal Classifications Matter?
Whether a crypto asset is classified as a security has significant implications for innovation and markets. If a token is deemed a security, its issuers and trading platforms must register with the SEC and comply with extensive reporting requirements. This burden can deter or even prevent crypto projects from operating in the U.S. In fact, due to this legal uncertainty, many blockchain startups have either moved abroad or never launched at all. Moreover, determining whether a token is a security or a commodity is a prerequisite for broader regulatory clarity. As long as this legal ambiguity persists, companies don’t know how to comply, and investors remain inadequately protected.
The SEC’s Crypto Approach During the Biden Era
Under President Biden (2021–2024), the SEC took an aggressive stance toward cryptocurrencies. Chairman Gary Gensler asserted that existing laws were largely sufficient and that most tokens in the market qualified as securities. Rather than proposing new rules, the SEC focused on strict enforcement to exert pressure on the industry. In 2023, major exchanges like Coinbase and Binance were targeted for allegedly offering unregistered securities. The withdrawal of the Coinbase lawsuit under the new administration in 2025 marked a clear break from this “regulation by enforcement” approach.
What Changed Under Trump’s Return in 2024?
With President Trump taking office in 2025, the SEC’s strategy on crypto underwent a major transformation. The agency suspended or dropped nearly all its pending lawsuits against the crypto industry. This reversal signaled a departure from the enforcement-heavy approach under Gensler. The new SEC leadership expressed a desire to establish a more “reasonable” regulatory path for digital assets. Under Uyeda, a crypto task force was formed to review existing regulations, and the agency began engaging in dialogue with the industry to develop clearer guidelines.
