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Crypto Law/Level I · What crypto is in law/1.3 Who's who/Lesson 1

The SEC

What the Securities and Exchange Commission does, why its power over crypto depends on the word ‘security’, and how its approach shifted in 2025 and 2026.

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. Searching sec.gov and EDGAR for a project’s name is free and is the cheapest due diligence before buying; a clean search proves nothing about quality, and staff statements or dismissals do not mean a court has ruled.
  2. Victims of securities fraud can often recover through SEC Fair Fund distributions by filing a free claim with the administrator; this requires meeting the published claims deadline, and recoveries usually cover only part of the loss.
  3. Tips are free through the SEC’s online portal, and whistleblowers whose original information leads to sanctions over $1 million can receive 10% to 30% of amounts collected; awards require a timely Form WB-APP application after the action is posted.
  4. Issuers of typical meme coins avoid registration costs under the February 2025 staff statement, and fundraisers can use Regulation Crowdfunding up to $5 million per 12 months; both leave antifraud liability and state securities laws fully in place.

MaterialsThe SEC’s Crypto Task Force page (sec.gov/about/crypto-task-force), which lists its statements and proposalsThe SEC press release of 25 July 2017 on its report about The DAO (release 2017-131)The SEC staff statement on meme coins of 27 February 2025Lesson 1.2.3, on the investment contract test

Wonder

  1. Can the SEC regulate every crypto token, or only some of them?
  2. If the SEC drops a case, does that mean the token was never a security?
  3. Do SEC staff statements change the law?

Explore

  1. The Securities and Exchange Commission (SEC) is the US federal agency that enforces the securities laws: the rules for selling investments to the public and for the markets where they trade. Congress created it in the Securities Exchange Act of 1934, a year after the Securities Act of 1933 required public offerings to be registered unless an exemption applies. The SEC writes rules, examines firms and brings civil cases. It cannot send anyone to prison; criminal securities cases are brought by the Department of Justice.
  2. The SEC’s reach over crypto depends on one label. It regulates only ‘securities’. Under the Supreme Court’s 1946 decision in SEC v. W.J. Howey Co., an ‘investment contract’ is a security when people invest money in a common enterprise expecting profits from the efforts of others (lesson 1.2.3). If a token sale fits that test, the seller needed to register it or use an exemption, and platforms trading it may need to register as exchanges or brokers. If it does not fit, the SEC generally has no say, and other agencies such as the CFTC may step in (lesson 1.3.2).
  3. The first big signal came on 25 July 2017, when the SEC published a report on The DAO, a token sale run by a so-called virtual organisation. It concluded the DAO tokens were securities and warned that new technology does not take fundraising outside securities law, though it brought no charges. Years of enforcement followed. In SEC v. Ripple Labs, filed in December 2020, Judge Analisa Torres of the federal court in Manhattan ruled in July 2023 that Ripple’s sales of XRP to institutions were unregistered offers of investment contracts, while its anonymous sales on trading platforms were not.
  4. In August 2024 the Ripple court imposed a civil penalty of about $125 million, and in August 2025 both sides dropped their appeals, leaving that judgment in place. By then the SEC’s direction had changed. On 21 January 2025 Acting Chairman Mark Uyeda launched a Crypto Task Force led by Commissioner Hester Peirce. On 27 February 2025 the SEC dismissed its case against the Coinbase exchange, saying the dismissal did not mean the claims lacked merit and did not reflect its position in other cases. Paul Atkins became chairman later in 2025.
  5. Also on 27 February 2025, the SEC’s Division of Corporation Finance said that typical meme coins, bought for entertainment or speculation, are not securities. Like every staff statement, it has no legal force: it does not change the law or bind a court, and it excludes tokens merely labelled as meme coins (lesson 1.1.3). In 2026 the Commission put out for public comment a proposed ‘Regulation Crypto Assets’, crypto custody rules and an order establishing an ‘innovation exemption’. Peirce resigned with effect from 2 October 2026. Proposals can change before adoption, so their status needs checking.
  6. A change of leadership changes priorities, not statutes. Courts still decide what is a security, buyers can still sue under the securities laws, and state securities regulators apply their own versions (lesson 1.3.6). Congress is weighing the Digital Asset Market Clarity Act, which would divide crypto oversight between the SEC and the CFTC, but as of October 2026 it has not passed the Senate. A practical check: before trusting a claim that a token ‘is not a security’, search sec.gov for the project’s name and note the date and status of any order, lawsuit or trading suspension.

Key facts

  • The SEC was created by the Securities Exchange Act of 1934.
  • Under SEC v. W.J. Howey Co. (1946), an investment contract is a security when money is invested in a common enterprise with an expectation of profits from the efforts of others.
  • On 25 July 2017 the SEC reported that tokens offered and sold by The DAO were securities, but it brought no charges.
  • In July 2023 Judge Analisa Torres held that Ripple’s institutional sales of XRP were unregistered offers of investment contracts but its programmatic sales on trading platforms were not.
  • The SEC launched its Crypto Task Force, led by Commissioner Hester Peirce, on 21 January 2025, and dismissed its case against Coinbase on 27 February 2025.
  • The SEC staff statement of 27 February 2025 that typical meme coins are not securities states that it has no legal force or effect.

Exercise nine, six, three, one

9CollectList up to 9 tokens, platforms or projects you have used or read about, and note for each whether the SEC has ever issued an order, filed a case or made a statement about it (some lists are shorter).
6ClusterSort them into 6 categories: SEC case still open, SEC case settled or decided, SEC case dismissed, covered by a staff statement, no SEC action found, and not sure.
3DistillReduce the 6 to 3 groups: a court or the Commission has ruled, the SEC has only expressed a view, and nothing official exists yet.
1CrystallizeWrite 1 sentence explaining, in your own words, why an SEC dismissal or staff statement is not the same as a court ruling that a token is not a security.

Fact check

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

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