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Crypto Law/Level I · What crypto is in law/1.1 Why law reaches crypto/Lesson 3

Rules, guidance and enforcement are not the same thing

How to tell a binding rule from an agency’s opinion or a single lawsuit, and why the difference decides how much weight each deserves.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Act on binding text only: a final rule published in the Federal Register binds, while staff statements such as the 27 February 2025 meme-coin statement have ‘no legal force’. Planning around binding law avoids paying to unwind moves based on signals; check effective dates.
  2. For tax positions, IRS revenue rulings and notices are listed authorities under Treas. Reg. §1.6662-4(d)(3)(iii) and can avoid the 20% accuracy penalty for free; staff speeches and FAQs carry less weight, and the tax remains due either way.
  3. Where a position has only a reasonable basis, attaching free Form 8275 to the return discloses it and can avoid the accuracy penalty; disclosure does not protect positions lacking reasonable basis or tax-shelter items.
  4. An IRS private letter ruling or SEC no-action letter gives certainty only to the requester; a private letter ruling carries a large IRS user fee, so it is cheaper overall only when the transaction’s stakes clearly exceed that fee plus counsel.

Materials5 U.S.C. §553, the federal rulemaking section of the Administrative Procedure Act (on law.cornell.edu)SEC Staff Accounting Bulletin No. 122 and its disclaimer about what staff bulletins areThe SEC Division of Corporation Finance staff statement on meme coins (27 February 2025)The Federal Register (federalregister.gov) for checking whether a rule is proposed or final

Wonder

  1. If a regulator says something in a statement, is that the law?
  2. Why do some rules take years while others change overnight?
  3. Does one enforcement case tell me what is allowed for everyone else?

Explore

  1. In US law, the strongest texts are statutes passed by a legislature and ‘legislative rules’, regulations an agency adopts under power a statute gives it. For federal agencies, 5 U.S.C. §553 of the Administrative Procedure Act sets the usual process: publish a notice of the proposed rule in the Federal Register, give the public a chance to send written comments, explain the final rule, and generally publish it at least 30 days before it takes effect. A rule made this way binds the public with the force of law until a court strikes it down, Congress overturns it, or the agency repeals it through the same process.
  2. Guidance is different. Section 553 exempts ‘interpretative rules’ and ‘general statements of policy’ from the notice-and-comment process, so agencies can issue and withdraw them quickly. Guidance tells you how an agency reads the law and how it plans to act; it does not create new legal duties by itself. A clear crypto example is the SEC’s Staff Accounting Bulletin No. 121 on how firms holding crypto for customers should account for it. Staff Accounting Bulletin No. 122, issued on 23 January 2025, rescinded it. The SEC says such bulletins ‘are not rules or interpretations of the Commission’.
  3. That bulletin also shows how weighty guidance can be. Congress passed a resolution under the Congressional Review Act to overturn Staff Accounting Bulletin No. 121. The President vetoed it on 31 May 2024, and on 11 July 2024 the House failed to reach the two-thirds majority needed to override, voting 228 to 184. The bulletin survived that political fight but was then withdrawn by the agency’s own staff in early 2025, with no vote and no public comment period. Guidance can shape an industry for years and still disappear in a day.
  4. Staff statements sit lower still. On 27 February 2025 the SEC’s Division of Corporation Finance said that, in its view, typical meme coin transactions are not securities offerings (lesson 3.2.3). The statement says it ‘has no legal force or effect’ and does not alter applicable law. It reflects the views of agency staff, not a vote of the Commission, so it does not bind courts, private plaintiffs, state regulators or future staff. Speeches by individual commissioners usually carry a similar note that they express the speaker’s own views.
  5. Enforcement means an agency or prosecutor taking action against particular people. A complaint is a set of allegations; a settlement binds only the parties to it; and a dismissal may say little about anyone else. When the SEC dismissed its case against Coinbase on 27 February 2025, it stated that the decision ‘does not reflect the Commission’s position on any other case.’ Critics argued that bringing cases instead of writing rules left the industry guessing, an approach called ‘regulation by enforcement’ (lesson 3.2.1). A case shows what an agency believed at a certain time, not a general rule for everyone.
  6. Final rules can also be undone by Congress. On 10 April 2025 a Congressional Review Act resolution became Public Law 119-5, overturning an IRS final rule on gross-proceeds reporting by brokers that provide digital asset sales services. A practical check for any crypto rule you read about: who issued it; did it go through notice and comment or appear as a bulletin, statement or speech; does the document say whether it binds anyone; and is it final, proposed, withdrawn or overturned? The Federal Register and the agency’s own page usually answer these questions in a few minutes.

Key facts

  • 5 U.S.C. §553 generally requires federal agencies to publish proposed rules, accept public comments and publish final rules at least 30 days before they take effect.
  • Section 553 exempts interpretative rules and general statements of policy from the notice-and-comment process.
  • SEC Staff Accounting Bulletin No. 122, issued on 23 January 2025, rescinded Staff Accounting Bulletin No. 121 on crypto custody accounting.
  • The President vetoed the resolution against Staff Accounting Bulletin No. 121 on 31 May 2024, and the House failed to override the veto on 11 July 2024.
  • The SEC staff statement on meme coins of 27 February 2025 states that it has no legal force or effect.
  • The SEC dismissed its case against Coinbase on 27 February 2025, saying the decision did not reflect its position on any other case.

Exercise nine, six, three, one

9CollectList up to 9 statements about crypto law you have read or heard recently, such as a new rule, an agency statement, a speech, a lawsuit or a settlement.
6ClusterSort them into 6 categories: statutes, final regulations, proposed regulations, agency or staff guidance, speeches and opinions, and enforcement actions or settlements.
3DistillReduce the 6 categories to 3 groups: binding law, signals of how an agency thinks, and allegations or outcomes affecting only particular parties.
1CrystallizeWrite 1 sentence explaining, in your own words, why an agency statement or a single enforcement case is weaker than a rule adopted through notice and comment.

Fact check

Dates, figures and claims checked against the published sources listed below.

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