Maxine Waters: criticism of crypto regulators and risks

SEC Changes Strategy: How Investors Can Adapt to the New Rules of the Game

Date Updated: January 25, 2025

The sudden termination of high-profile U.S. Securities and Exchange Commission (SEC) cases against Coinbase, Binance, and Tron is not a total victory for the crypto industry, but rather a signal of a transition to a new stage of regulation. The responsibility for risk assessment now falls more heavily on investors, who must navigate a rapidly changing legal environment. This article provides an analysis of the reasons behind the SEC's shift in course, a breakdown of new threats, and a practical action plan to protect your capital.

Regulatory Pivot: Congress Demands Explanations

On December 20, 2024, Congresswoman Maxine Waters, Chairwoman of the House Financial Services Committee, initiated a parliamentary investigation into the SEC. In an official letter
Source: House Committee on Financial Services, 12.20.2024, she demanded explanations from the Commission's leadership regarding the withdrawal of lawsuits in landmark cases:

• SEC v. Coinbase, Inc. (Case 1:23-cv-04738, S.D.N.Y.): The lawsuit, filed in June 2023 accusing the exchange of operating with unregistered securities, was withdrawn at the SEC's initiative on December 15, 2024.
  Case documents available via PACER
• SEC v. Binance Holdings Ltd. (Case 1:23-cv-01599, D.D.C.): Primary claims regarding the status of BNB and BUSD tokens as securities have been dropped. Investigations in other areas (AML/KYC compliance) continue under the jurisdiction of other agencies.
  Case documents available via PACER
• SEC v. Justin Sun (Case 1:23-cv-02188, S.D.N.Y.): The case involving manipulation of the TRX token and its offering as a security has been closed.
  Case documents available via PACER

“The market may have perceived this as a signal to lower its guard, but in reality, we are entering a ‘gray zone’ where rules can change without warning,” comments Anna Kowalevski, partner at the law firm CryptoLegal.

Why the SEC Changed Tactics: Analysis of Causes

The SEC's official comment regarding the “reallocation of resources and strategic priorities”
Source: SEC Press Release No. 2025-12, 01.15.2025 does not reveal the full picture. Analysts highlight several key factors:

1. Legal Instability of Position. The foundation of the SEC's accusations is the Howey Test, a criterion developed by the U.S. Supreme Court in 1946 (SEC v. W.J. Howey Co.). It determines whether a transaction is an “investment contract” (a security) if there is an investment of money in a common enterprise with an expectation of profit from the efforts of others. Applying this test to decentralized assets is controversial, and SEC lawyers likely assessed the prospects of victory in prolonged litigation as low.
2. Shift in Political Direction. The new administration and SEC leadership appointed after the elections shifted focus from total control to stimulating technological innovation, fearing an “exodus” of blockchain startups to more favorable jurisdictions.
3. Interagency Competition. Withdrawing lawsuits may be a tactical move in the struggle with the Commodity Futures Trading Commission (CFTC) for the right to regulate the crypto market. The SEC may have stepped back to wait for Congress to pass legislation clearly defining regulatory boundaries.
4. Budgetary and Resource Constraints. The Commission may have faced a shortage of resources to conduct expensive legal battles against well-funded tech companies, deciding instead to focus on more obvious cases of fraud.

The market responded with growth: Coinbase shares (COIN) rose 12% over two trading sessions following the news, and the total crypto market capitalization, according to CoinMarketCap, added over $100 billion in the week from January 15 to January 22, 2025.
Source: TradingView, COIN chart data, Jan 2025.

New Risks for Investors

The easing of regulatory pressure creates a favorable environment for scammers and manipulators.

For Retail Investors

• Rise in “pump-and-dump” schemes and scams (Priority: High). The lack of threat from the SEC may embolden organizers of fraudulent schemes. A past example is the SaveTheKids (KIDS) token, which in 2021 crashed 90% in value within 24 hours after being heavily promoted by influencers.
  Source: Cointelegraph Investigation, 2021.
• Decline in Exchange Listing Quality (Priority: Medium). In pursuit of liquidity, exchanges may begin adding questionable assets with opaque tokenomics, increasing risks for non-professional investors.

For Institutional Investors

• Legal Instability (Priority: High). Sudden shifts in regulatory policy make long-term strategic planning difficult and deter conservative funds.
• Reputational Risks (Priority: Medium). Investing in a market without clear rules can damage the reputation of major companies in the eyes of shareholders and boards of directors.

Practical Protection: AML Hygiene and Due Diligence

Even with the SEC’s change in tactics, exchanges are required to comply with international Anti-Money Laundering (AML) standards. Receiving funds from a “dirty” address linked to mixers, the darknet, or hacks can lead to account freezing.

Transaction Verification Checklist

1. Request the counterparty's address before making a transfer.
2. Check the address through an AML service. Free checkers (e.g., AMLBot, GetBlock) are suitable for quick assessments. Note that their data may be less comprehensive than paid alternatives.
3. Analyze the report. Look for direct and indirect links to high-risk categories: sanctions lists (OFAC), darknet services, mixers, scam projects, and addresses linked to hacks.
4. Decide based on risk thresholds. As a practical recommendation: for amounts over $5,000 or a total risk level above 50%, decline the transaction or request funds from a different, clean address.
5. Maintain documentation. Save verification reports to prove due diligence in case of potential inquiries from compliance departments.

For businesses and regular large transactions, professional solutions (Chainalysis, Crystal Blockchain, TRM Labs, Elliptic) providing detailed compliance reports are required.

Three Scenarios for Future Regulation

1. Scenario 1: Legislative Intervention.

   • Probability: High.
   • Signals: Active discussion of bills in relevant Congressional committees, public hearings involving the heads of the SEC and CFTC, bipartisan initiatives to create a regulatory framework.

2. Scenario 2: SEC Tactical Pause.

   • Probability: Possible.
   • Signals: Emergence of new, more narrowly focused SEC lawsuits against crypto projects, focusing on fraud and manipulation rather than a token's status as a security.

3. Scenario 3: Shift of Focus to DeFi and AI.

   • Probability: High.
   • Signals: Publication of SEC reports and warnings about risks in DeFi, an increase in investigations into decentralized protocols and the use of AI in trading.

Investor Action Plan

1. Immediate (within 72 hours):

   • Conduct an AML check of your main wallets for risky connections.
   • Review your portfolio, assessing the risks of altcoins with opaque reputations or unclear legal status.

2. Mid-term (1–3 months):

   • Diversify asset storage: distribute funds across several regulated exchanges and non-custodial wallets (e.g., Ledger, Trezor).
   • Set up news alerts for keywords like “SEC,” “CFTC,” and “crypto regulation” to promptly track changes.

3. Long-term (6+ months):

   • Shift focus toward projects with proven practical utility, a strong community, and a transparent governance model. Such assets are less dependent on speculation and regulatory sentiment.

Disclaimer: This material is for informational purposes only and does not constitute investment, legal, or tax advice. Cryptocurrency markets involve high risks. Before making financial decisions, conduct your own analysis and consult with a qualified lawyer and financial advisor in your jurisdiction. AML practices and regulatory requirements may vary significantly by country.