From DeFi Land to the OpenSea: SEC Threatens the Entire Crypto World

As the U.S. Securities and Exchange Commission (SEC) presses forward with efforts to regulate crypto, the agency’s enforcement threats have left a sprawling paper trail across the industry. Whether it’s entities issuing coins or exchanges enabling them to trade, more market participants are waking up to a so-called Before the SEC takes formal legal action against an entity, the agency will often send targets of an investigation a Last year, crypto watchers became familiar with the term, as the SEC embarked on a spree of enforcement actions following the collapse of prominent crypto exchange, FTX.Before the regulator In response to Wednesday’s OpenSea revelations, Coinbase CEO Brian Armstrong Congrats and welcome to the club!I’m long wells notice companies. https://t.co/cye8T5AlyS— Brian Armstrong (@brian_armstrong) August 28, 2024Notably, a Wells notice does not mean that an enforcement action is imminent. Rather, it signifies that the SEC’s Division of Enforcement will make a proposal to the Commission, which is subsequently considered and voted on by Commission members, according to the Companies that the SEC has prepared to sue this year include the decentralized exchange Uniswap and the trading platform Robinhood. The SEC has yet to bring formal charges against those firms, which have Last year, a total of 46 Wells notices were followed by Under the leadership of SEC Chair Gary Gensler, the Division of Enforcement’s Cyber Unit was renamed in 2022, adding “Crypto Assets” to its official title. Featuring more investigative attorneys and fraud analysts, the unit’s size nearly doubled in 2022 to 50 full-time staffers.In the SEC’s When asked for comment on changes to the SEC’s investigatory scope, an SEC spokesperson directed Last month, the SEC’s Director of the Division of Enforcement Gurbir Grewal At the same time, the Division’s allegations can focus on the nuances of offerings, such as stablecoins that aren’t stable, DeFi protocols that aren’t decentralized, and smart contracts that can be manipulated. In practice, Grewal described the SEC’s scope for crypto as broad.“While we can appreciate the innovation around, and the technological advancements of blockchain and distributed ledger technology, we must also be cognizant of the risks and harms,” he said. “As in any other space, we have a duty to analyze whether the activity is subject to the federal securities laws and, if so, whether those laws have been violated.”Edited by Andrew Hayward