Whether the US Securities Exchange Commission (SEC) is doing a good or bad job enforcing the law over the crypto industry is a matter of perspective.
On the one hand, crypto fans will point to the industry’s victories against the regulator as proof that it’s negligent, vague, and ineffectual.
On the other, the space’s critics rejoice every time the SEC comes out on top, using such cases as proof that coin promoters are being held accountable for their failures.
But when it comes to such legal battles, cases that have gone to court, and punishments handed out to unscrupulous or incompetent coin promoters, what’s the score? Is the SEC winning or is it, as some have claimed, powerless to adequately police the seemingly unending tide of coins flooding the market?
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SEC versus crypto in Congress: Undefeated
First, regarding legislative battles in Congress, there have been no major bills that have limited the SEC’s authority over the crypto industry.
President Joe Biden vetoed H.J. 109, the most advanced bill that would have overturned a single crypto rule, SEC Staff Accounting Bulletin 121. Therefore, the SEC prevailed in that particular Congressional battle.
Otherwise, there are various bills that exist or have passed one chamber of Congress, but no President has signed any law that has meaningfully limited the SEC’s authority over the crypto industry. That leaves the SEC as virtually undefeated in Congress.
SEC versus crypto in court: The numbers
Next, we turned to US civil courts. Since 2019, the SEC has publicly filed 116 crypto lawsuits in federal courts, naming over 260 crypto companies and promoters as defendants.
(Note: When corporate defendants shared similar names, such as in the case of the separately-named defendants IPro Solutions LLC and IPro Network LLC, we collapsed similarly-named entities to a single approximation so as to be more conservative.)
According to our research, the SEC has successfully settled or won 95 of these lawsuits. Protos was unable to determine the outcome of 21 cases, most of which are either unresolvable or still ongoing. For example, the SEC sued John McAfee in 2010, but he died in 2021, so the outcome of that lawsuit is unresolvable.
Similarly, the SEC has sued many crypto promoters who either live abroad or who have fled the US, so Commissioners cannot finalize those lawsuits without the cooperation of foreign sovereigns.
Generally speaking, the SEC has an overwhelming track record of successful litigation against crypto promoters. Its losses are rare yet attract significant media attention.
For example, the regulator categorically lost its complaints against the crypto defendant Debt Box. The SEC also lost two of its three complaints against Ripple: programmatic secondary market sales of XRP, and related aiding and abetting complaints against Chris Larsen and Brad Garlinghouse.
The SEC also lost its legal battle with Grayscale, in which it was a defendant (not plaintiff). The powerful US District of Columbia Court of Appeals forced the SEC to either approve a spot bitcoin ETF or explain its denial in a non-arbitrary and capricious manner. Ultimately, commissioners decided to relent to Grayscale.
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When counting its win/loss ratio against its 260 defendants, however, its win rate is far above 95%. If counting each individual complaint separately — distinguishing each civil enforcement action within each lawsuit as a separate legal battle, which might be the proper method of tallying — then its win rate would exceed 99%.
Note on methodology: Protos hasn’t researched SEC lawsuits prior to January 2019, nor have we tallied the SEC’s win rate as a defendant. The SEC is usually almost always a plaintiff in civil courts. However, a few crypto companies as plaintiffs have sued the SEC, such as Coinbase, Consensys, and the Blockchain Association. Most lawsuits naming the SEC as a defendant are still in active litigation.
