Crypto dominates US SEC policy work, few TradFi rules pruned

Crypto assets have dominated the US Securities and Exchange Commission’s (SEC) policy work so far in the first half of 2025. The watchdog has pruned few rules for firms it actually regulates, despite the Trump administration’s desire to slash red tape for financial services firms.

Since January 21, perhaps the SEC’s biggest non-crypto move has been to stop its defence of the climate-related disclosure rules, which are being challenged in court.

The new approach has been criticised by current and former SEC staff.

Cases dropped

Mark Uyeda’s first action on assuming the role of SEC’s acting chair on January 21 was to launch the Crypto Task Force and appoint commissioner Hester Peirce to lead it.  A month later he disbanded the crypto assets and cyber unit, replacing it with the cyber and emerging technologies unit to focus on “combating cyber-related misconduct” including fraud related to crypto assets.

Following on from Uyeda’s vow to end “regulation by enforcement”, at least 11 lawsuits the SEC had mounted against crypto firms under previous chair Gary Gensler have been dropped.

“For the last several years, the commission’s views on crypto have been largely expressed through enforcement actions without engaging the general public,” Uyeda said in a statement accompanying the SECʼs decision in February to drop its case against Coinbase. 

The dismissal would facilitate the SEC’s ongoing efforts to “renew” its regulatory approach to crypto industry, it said. Commissioner Caroline Crenshaw said in a dissenting statement, however, that the SEC’s move to dismiss crypto lawsuits undermined its credibility.

Special treatment

One former SEC senior advisor believes this relaxation of crypto enforcement and abandonment of lawsuits amounts to the SEC treating one part of the marketplace differently from the rest. Corey Frayer was senior adviser to Gensler on both crypto markets and financial stability

“We demonstrated repeatedly that the securities laws apply to crypto to the extent that we went to court and there were decisions, final decisions, made by judges. We had an almost flawless track record, save for a half win on Ripple on an unprecedented decision,” said Frayer, now director of investor protection at the Consumer Federation of America (CFA).

He challenged the idea that “regulation by enforcement” was an approach available to the regulator. “Enforcement is how you get people to obey regulations. If the SEC now thinks it shouldnʼt be a law enforcement agency, then get Congress to pass legislation that says the SEC canʼt bring civil suits anymore. It is absurd to say that thereʼs such a thing as regulation by enforcement,” he said.

In addition to dropping cases against crypto firms, on March 10 the SEC eliminated the director of the division of enforcement’s delegation of authority to issue formal orders of investigation.

“Formal orders designate the enforcement staff that are authorised to issue subpoenas in connection with investigations under the Federal securities laws. This amendment is the result of the commission’s experience with its non-public investigations. The amendment is intended to increase effectiveness by more closely aligning the commission’s use of its investigative resources with commission priorities,” the SEC’s rule change document said.

All in for crypto

In all, the SEC has made more than 21 statements either devoted solely to crypto or mentioning it. It has held three out of five planned roundtable discussions and issued statements about meme coins, crypto mining activities, stablecoins, and offerings and registration of securities in the crypto asset markets.

“I am eager to tackle long-festering issues, such as regulatory treatment of digital assets and distributed ledger technologies,” Paul Atkins, the SEC’s newly appointed chair told one of the roundtables last month. Former crypto lobbyist Atkins said that Peirce — a critic of Gensler’s approach —was the right person to lead the SEC’s crypto work. 

The CFAʼs Frayer said: “With regard to the Crypto Task Force, commissioner Peirce has already decided what she wants to do: itʼs going to be very deregulatory. They will continue to be hypocritical about process. They will do guidance. They will do all the things that they criticised us for not going through notice and comment, rulemaking. They believe when youʼre deregulating, the customer is the industry. During our tenure, the customer was regular investors, and thatʼs just not the case now.”

Peirce and other commissioners claimed Gensler’s SEC did not engage with the crypto community, another claim that Frayer disputes. Crypto firms did not want their meetings with the SEC to be disclosed, according to Frayer. SEC staff met with crypto asset firms for exploratory talks, but they went nowhere.

“They were not willing to give up their vertically integrated model, where a single company was a broker dealer and an exchange and a custodian and a clearing house, and often a fund that had the ability to front run their own customers,” Frayer said. “We saw that model at FTX. That is just an unacceptable, unfair way to run a marketplace.” 

“Walking away” from climate

On March 27, then-commissioner Uyeda announced the SEC would end its court defence of the climate disclosure rules, which he called “costly and unnecessarily intrusive”.

Crenshaw spoke up forcefully against the decision to “walk away” from the rules, saying the SEC was dismantling it “by way of politics” and “unlawfully”.

“This leaves other parties, including the court, in a strange and perhaps untenable situation. In effect, the majority of the commission is crossing their fingers and rooting for the demise of this rule, while they eat popcorn on the sidelines. The court should not take the bait. Rather, the SEC should do its job. It should defend its existing rule in litigation. If the agency chooses not to defend that rule, then it should ask the court to stay the litigation while the agency comes up with a rule that it is prepared to defend,” Crenshaw wrote.  

Crenshaw has been a vocal critic of the SEC’s new direction, particularly seeking to challenge its inchoate approach to crypto.

Other actions  

The SECʼs work outside crypto has focused on improving small business capital formation (Rule A). It provided exemptive relief on form SHO as well as personal identifying information on the consolidated tape. It has delayed reporting requirements on form PF, extended the compliance date for investment company names and extended the deadline to amend the standards applicable to covered clearing agencies for US Treasury securities.

It will repropose certain aspects of the recently adopted Form N-PORT reporting requirements.

Uyeda said in a March speech that he had “concerns” about some existing rule proposals, including those “addressing the safeguarding of advisory client assets, outsourcing by investment advisers, ESG disclosures for funds and advisers, and digital engagement practices”. In some cases, SEC staff would consider alternative rules or in the case of client asset safeguarding, might withdraw them, he said.