Lawmakers warn the regulator’s retreat from major cases risks undermining investor protection and raises concerns about political influence.
Washington has been thrust back into the center of the crypto regulation debate after a group of senior Democratic lawmakers accused the U.S. Securities and Exchange Commission of abruptly abandoning key enforcement actions against some of the industry’s largest companies.
In a letter sent to SEC Chairman Paul Atkins, Representatives Maxine Waters, Sean Casten and Brad Sherman said the agency’s decision to close or dismiss at least a dozen high profile crypto cases since early 2025 marks a sharp reversal from years of aggressive oversight, and comes at a moment of heightened political sensitivity following Donald Trump’s return to the White House.
The lawmakers said the timing of the withdrawals, including cases against Binance, Coinbase and Kraken, threatens investor protection and market integrity, particularly because several of the companies involved had already lost key court motions and were facing continuing litigation.
A sudden change in enforcement posture
According to the letter, the SEC had successfully defended its fraud and unregistered securities claims against multiple firms, defeating motions to dismiss and advancing cases that could have set major regulatory precedents. Instead, the Commission chose to voluntarily drop or close those matters, citing regulatory discretion rather than legal setbacks.
Waters, who leads Democrats on the House Financial Services Committee, said the reversal creates the appearance that politics, not law, is driving regulatory decisions.
“The SEC’s whiplash policy reversal from vigorous enforcement against unscrupulous crypto players to possible abandonment of a strong case creates the appearance that political considerations, not legal merits, potentially drove this decision,” Waters wrote. “The American public deserve to know whether the SEC’s independence has been compromised.”
The lawmakers argue the shift is particularly troubling because many of the firms that benefited from the enforcement retreat, including Coinbase, Kraken, Ripple, Robinhood and Crypto.com, donated millions of dollars to Trump’s campaign and inauguration activities. They say the overlap between political fundraising and regulatory outcomes raises serious questions about whether the SEC is being pressured to soften its stance.
Justin Sun draws scrutiny
The letter singles out Justin Sun, founder of the Tron Foundation, whose SEC case remains paused while he continues to invest heavily in Trump linked crypto ventures. Lawmakers said the continued stay on Sun’s case is difficult to justify given the strength of the SEC’s original claims and the broader national security and market integrity risks.
They also expressed concern over Sun’s ties to China, warning that potential connections to the Chinese Communist Party could amplify risks to U.S. financial markets if enforcement decisions are influenced by political or foreign considerations.
The Democrats urged the SEC to lift the stay on Sun’s case or negotiate a settlement that reflects the merits of its allegations. They also demanded internal documents and communications explaining why enforcement actions were halted and whether any political or foreign influence played a role.
Why this matters for the crypto industry
The dispute highlights a growing tension over how the U.S. should regulate digital assets at a time when crypto firms are becoming more politically powerful and deeply integrated into mainstream finance.
For years, the SEC positioned itself as the primary watchdog for crypto markets, pursuing cases that sought to define when tokens qualify as securities and how exchanges should register. The sudden retreat from those battles risks leaving major regulatory questions unresolved, creating uncertainty for investors and companies alike.
If Democrats regain control of the House in 2026, Waters could again chair the Financial Services Committee, giving Congress a stronger platform to investigate the SEC’s decision making and potentially reshape crypto oversight.
For now, the letter signals that the political fight over crypto regulation is far from over, and that enforcement choices made in Washington will be closely scrutinized as the industry’s influence continues to grow.
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