SEC Scales Down Crypto Enforcement Team: Reassigning Lawyers

The Securities and Exchange Commission (SEC) is reassigning more than 50 lawyers and staff, who were solely responsible for cryptocurrency enforcement actions, to other divisions, The New York Times reported yesterday (Wednesday), citing five anonymous sources. However, the agency has not confirmed anything officially.

New Leadership, New Focus

The move came after Mark Uyeda, appointed by the Donald Trump administration, took over as the acting chair of the regulator. Trump had already nominated Paul Atkins to the top regulatory role, but his appointment is pending Senate approval.

The reshuffling of the SEC’s special unit for crypto enforcement affirms the regulator's decision to scale back crypto enforcement actions. Uyeda has also set up a team to review the regulator’s approach to dealing with digital assets, with crypto-friendly Commissioner Hester Peirce as the head of the task force.

“The commission’s handling of crypto has been marked by legal imprecision and commercial impracticality,” Peirce wrote in an official position paper released by the regulator, adding that the goal of the task force is to allow people “to experiment and build interesting things” without allowing crypto to become “a haven for fraudsters.”

Trump: Crypto Foe Turned Friend

One of President Trump’s first executive orders also showed that he would keep his campaign promise to introduce crypto-friendly rules. He has established a working group to explore potential cryptocurrency regulations for the country.

Following Trump’s re-entry into the White House, the Commodity Futures Trading Commission (CFTC), which oversees the derivatives market, also changed leadership, with crypto-friendly Republican Caroline Pham as its Acting Chair.

The SEC formed the dedicated crypto unit in 2017 under Trump's first presidential term, which initially had an anti-crypto stance. Gary Gensler, who was appointed as SEC Chair by the Joe Biden administration, ramped up the agency’s actions against crypto and opened multiple high-profile lawsuits against crypto companies like Ripple, Coinbase, and Binance. The unit brought over 80 dedicated enforcement actions.

Gensler even doubled the crypto team’s size to 50 in May 2022. However, how the scaling down of the cryptocurrency unit will impact pending enforcement actions remains unclear.

Interestingly, several crypto companies are now taking retaliatory measures against SEC lawyers responsible for actions against crypto firms. Coinbase’s CEO, Brian Armstrong, wrote on social media that his company would not hire law firms that employed senior SEC officials responsible for actions against crypto companies.

Gemini’s co-founder, Tyler Winklevoss, also confirmed that his company would not hire any Massachusetts Institute of Technology graduates, even as interns, as Gensler joined the faculty there after resigning from the SEC.