SEC Ends Regulation-by-Enforcement Era, Private Litigation Expected to Rise
The SEC has confirmed the end of its regulation-by-enforcement era under new leadership, reducing exposure to regulatory suits for the digital asset industry. Key developments include:
- Formation of a Crypto Task Force aimed at clarifying registration and legal status of digital assets.
- Dismissing nearly all non-fraud cases related to registration issues.
- Replacement of the Crypto Assets and Cyber Unit with the Cyber and Emerging Technologies Unit focused on investor protection against fraud.
Despite these changes, private plaintiffs may exploit the enforcement void by pursuing litigation over alleged violations of federal and state securities laws, including:
- Sale of unregistered securities
- Misleading statements in prospectuses or white papers
- Securities fraud and misconduct
- Violations by company leadership
Courts remain free to interpret whether digital assets qualify as securities, which could lead to an increase in private lawsuits. Businesses should assess their legal risks in light of potential litigation from private plaintiffs, especially concerning meme coins.