SEC & Crypto: How Does The SEC Regulate Crypto?

The Securities and Exchange Commission (SEC) has cracked down on crypto including XRP, Binance, Coinbase & more. Learn about the SEC & crypto in our guide.

Does the SEC regulate crypto?

Yes and no. It all depends on whether the given cryptocurrency or exchange is deemed to be a security or dealing in securities. The SEC has deemed many cryptocurrencies as securities and has issued enforcement actions against many crypto exchanges for failing to register as a securities exchange, fraudulent investment schemes, and more.

Which cryptocurrencies are regulated by the SEC?

Any crypto deemed to be a security may be regulated by the SEC. Historically, the SEC has had a confusing stance on which cryptocurrencies are considered securities, and which are not. Similarly, if a crypto exchange is selling cryptocurrencies that are determined to be securities by the SEC, the SEC may also gain regulatory oversight over said exchange(s).

Which cryptocurrencies are securities?

There are currently 66 cryptocurrencies, including synthetic crypto assets, that the SEC says are securities. These are:

• Ripple (XRP)

• Telegram’s Gram (TON)

• LBRY Credits (LBC)

• OmiseGo (OMG)

• DASH (DASH)

• Algorand (ALGO)

• Naga (NGC)

• Monolith (TKN)

• IHT Real Estate (IHT)

• Power Ledger (POWR)

• Kromatica (KROM)

• DFX Finance (DFX)

• Amp (AMP)

• Rally (RLY)

• Rari Governance Token (RGT)

• DerivaDAO (DDX)

• XYO Network (XYO)

• Liechtenstein Cryptoasset Exchange (LCX)

• Kin (KIN)

• Salt Lending (SALT)

• Beaxy Token (BXY)

• DragonChain (DRGN)

• Tron (TRX)

• BitTorrent (BTT)

• Terra USD (UST)

• Luna (LUNA)

• Mirror Protocol (MIR)

• Mango (MNGO)

• Ducat (DUCAT)

• Locke (LOCKE)

• EthereumMax (EMAX)

• Hydro (HYDRO)

• BitConnect (BCC)

• Meta 1 Coin (META1)

• Filecoin (FIL)

• Binance Coin (BNB)

• Binance USD (BUSD)

• Solana (SOL)

• Cardano (ADA)

• Polygon (MATIC)

• Cosmos (ATOM)

• The Sandbox (SAND)

• Decentraland (MANA)

• Axie Infinity (AXS)

• COTI (COTI)

• Paragon (PRG)

• AirToken (AIR)

• Chiliz (CHZ)

• Flow (FLOW)

• Internet Computer (ICP)

• Near (NEAR)

• Voyager Token (VGX)

• Nexo (NEXO)

• Mirrored Apple Inc. (mAAPL)

• Mirrored Amazon.com, Inc. (mAMZN)

• Mirrored Alibaba Group Holding Limited (mBABA)

• Mirrored Alphabet Inc. (mGOOGL)

• Mirrored Microsoft Corporation (mMSFT)

• Mirrored Netflix, Inc. (mNFLX)

• Mirrored Tesla, Inc. (mTSLA)

• Mirrored Twitter Inc. (mTWTR)

• Mirrored iShares Gold Trust (mIAU)

• Mirrored Invesco QQQ Trust (mQQQ)

• Mirrored iShares Silver Trust (mSLV)

• Mirrored United States Oil Fund, LP (mUSO)

• Mirrored ProShares VIX Short-Term Futures ETF (mVIXY)

What makes a crypto a security?

The SEC uses the Howey Test to determine whether a transaction should be considered a security. The Howey Test states a transaction is considered a security if it meets four criteria:

• Money is invested

• There is an expectation the investor will earn a profit

• The investment is in a common enterprise

• Profits are generated via the efforts of others

What does it mean when a crypto is a security? 

Not much. Even though the SEC has named a large number of crypto assets as securities, this does not legally classify them as securities yet. In order for any crypto to be legally considered a security, this would need to be proven in a court of law - and this hasn’t happened for any crypto yet.

An excellent example of this is Ripple (XRP). The SEC labeled XRP as a security back in 2020, and so began a legal battle between the SEC and Ripple. After three years of legal action, in July 2023, a Southern District Judge ruled that the XRP token is not a security for retailer investors. It’s good news for many, and a bull run for XRP followed, but the judge did also find that institutional sales of XRP would still be classified as a security - so the SEC may continue legal action.

All this to say, until the SEC is able to prove in court that each crypto they label a security is a security - there’s very little change for average crypto investors. Of course, the market is fickle, and when crypto is named a security there may be negative price movements as a result. 

Given the confusing stance from the SEC given the criteria of the Howey Test - you might be wondering why more popular cryptocurrencies like Bitcoin or Ethereum aren’t considered securities while other cryptocurrencies are. 

Is Bitcoin a security?

No. Bitcoin is the only digital asset that has been clearly defined as not being a security. Experts state Bitcoin is not considered a security due to its anonymous and open-source origins, meaning investor profits are not dependent on the efforts of developers or other promoters. Confusingly though, despite being effectively the same concept, WBTC, BCH, BSV, and more haven’t been defined in this manner.

Is Ethereum a security?

Ethereum is more of a grey area. The SEC Chairman, Gary Gensler, has been reluctant even when pressed to define Ethereum as a security, despite being willing to label many other Ethereum ecosystem assets as securities. In short, there’s little clarity from the SEC on Ethereum’s status as a potential security. 

Which cryptocurrencies are banned by the SEC?

Very few. Just because the SEC deems a cryptocurrency as an unregistered security, doesn’t make said crypto illegal. As we explained above, the SEC still needs to go through legal proceedings to prove this for each crypto asset. 

However, there are some enforcement actions the SEC has taken against crypto exchanges like FTX, and fraudulent schemes like BitConnect, due to illegal activities by persons involved.

Which crypto exchanges are regulated by the SEC?

Very few crypto exchanges are registered with the SEC, and the SEC until recently has been very quiet about which exchanges or crypto businesses are. At the time of writing, here are the firms that have collaborated with the SEC so far:

• Blockchain of Things (now defunct)

• ParagonCoin (following regulatory action, now defunct)

• YouNow (PROPS token now defunct)

• AirFox, now Carrier EQ (following regulatory action)

• Enigma MPC (now part of the Secret Network)

• SALT Lending (currently undergoing a conversion of debt to equity after Series A funding)

• Hiro Systems (formerly Blockstack)

• INX One

• CeresCoin

Which crypto exchanges has the SEC issued enforcements against?

The SEC labeling multiple cryptocurrencies as securities hasn’t been the regulator's only attempt to crack down on crypto. The SEC has made enforcement actions against multiple exchanges (and involved persons) including:

• Binance

• Kraken

• Coinbase

• Celsius Network

• FTX

• Bittrex

• Beaxy

• Nexo

• Gemini

• BlockFi

• BitConnect

As well as this, many notable figures in the crypto industry have had actions filed against them by the SEC, including:

• Justin Sun (relating to the Tron Foundation Limited, BitTorrent, and Rainberry Inc.)

• Do Hyeong Kwon (relating to Terraform Labs PTE)

• Samuel Bankman-Fried (relating to FTX)

• Richard Heart (relating to Hex, PulseChain, and PulseX)

Even some well-known celebrities have been caught up in crypto charges from the SEC, including Kim Kardashian, Jake Paul, Lindsay Lohan, Floyd Mayweather, Khaled Khaled, and Paul Pierce.

See a full record of SEC enforcements relating to crypto and cyber security.