The cryptocurrency legal and regulatory environment is experiencing significant shifts in 2025, presenting both opportunities and ongoing risks for technology companies in this space. Partner Dave Feder and associate Rebecca Matsumura unpacked these concerns in their “Quarter in Review: Crypto Litigation and Enforcement Updates” moderated by associate Christopher Crawford. Here's what you need to know about recent developments and their implications.
Recent months have seen a dramatic shift in Securities and Enforcement Commission enforcement strategy, with the dismissal of several high-profile cases, including those the SEC filed against Ripple, Coinbase, and Kraken. This may mark what many consider "the end of regulation by enforcement” in the blockchain industry. However, companies should maintain vigilance—while the current administration has adopted a more constructive approach, enforcement priorities could shift again with future administrations.
The dismissals signal an important pivot toward providing clearer guidance rather than using enforcement actions to establish precedent. For previously targeted business models that faced SEC scrutiny, there may be opportunities to revisit these approaches under the new regulatory climate. However, companies should carefully evaluate risks, as applicable statutes of limitation may extend into a future administration with different enforcement priorities.
Another significant sign of changing winds is the SEC's rescission of Staff Accounting Bulletin 121, which had required companies safeguarding crypto assets to record them as liabilities on their balance sheets. The new SAB 122 restores traditional treatment of custodied assets as off-balance-sheet items, removing a key obstacle for regulated entities seeking to participate in crypto markets.
The SEC has also issued guidance regarding mining activities, determining that both self-mining and mining pools generally do not constitute securities under the Howey test. The guidance specifically notes that computational resources devoted to proof-of-work mining represent efforts of the miner rather than "efforts of others," while pool operators' activities are considered administrative rather than managerial.
The Department of Justice continues to pursue cases involving fraud and market manipulation. Recent prosecutions highlight ongoing scrutiny of:
Recent market manipulation cases brought against market makers in the District of Massachusetts, for instance, illustrate authorities' willingness to pursue complex criminal investigations, including using undercover operations to gather evidence. The cases—brought against 18 individuals and entities accused of using bots to make sham trades—explore the line between legitimate “market making” and manipulation. They also serve as a reminder to companies about the importance of maintaining robust compliance programs focused on preventing market manipulation and insider trading.
An emerging area of risk comes from private litigation, particularly regarding Decentralized Autonomous Organizations (DAOs). A few recent cases have held that DAOs constitute general partnerships, potentially exposing participants to joint and several liability for DAO activities.
For example, in Samuels v. Lido DAO, et al., a class action brought against the Lido DAO and multiple venture capital firms on behalf of LDO token purchasers, the court found that Lido DAO could be sued as a general partnership under California law. The outcome in Samuels should be of interest to similarly situated entities, organizations, and investors, including:
These cases underscore the importance of establishing appropriate legal structures for DAO activities.
Some entities have been concerned that enforcing their rights risks availing themselves to the courts in a way that gives the courts jurisdiction over them. But a shift away from regulation by enforcement could ameliorate those concerns, and we may see more in the way of traditional commercial litigation, breach of contract disputes, and matters of that nature.
While the current environment may present new opportunities, companies should proceed thoughtfully with appropriate legal counsel to navigate both immediate and long-term risks. Success requires balancing innovation with prudent risk management and maintaining adaptable compliance frameworks.
Register below to watch the webinar on demand. For the latest cryptocurrency news and regulatory developments, visit our Fenwick Crypto Review.