At a Glance
- Three House Democrats accuse the SEC of abandoning crypto enforcement cases after the industry poured $133 million into the 2024 elections
- The agency dismissed cases against Binance, Coinbase, and Kraken while receiving record campaign contributions
- Lawmakers call the pattern a potential “pay-to-play scheme” that puts investors and the economy at risk
- Why it matters: The shift signals a dramatic reversal from Biden-era enforcement to Trump-era crypto embrace
House Democrats are sounding the alarm over the Securities and Exchange Commission’s sudden retreat from crypto enforcement, citing unprecedented campaign spending by the industry and mounting evidence of political favoritism.
Lawmakers Demand Answers
Three Democratic members of the House Financial Services Committee have published an open letter to SEC Chairman Paul Atkins demanding an explanation for the agency’s dramatic shift in crypto enforcement. Representatives Maxine Waters, Sean Casten, and Brad Sherman signed the letter, which directly challenges the commission’s recent decisions to dismiss high-profile cases.
“Given the industry’s history of investor-harm and the clear mandate of the securities laws to protect market participants, this turn raises troubling questions about the SEC’s priorities and effectiveness,” the letter states. “Frankly, it puts both investors and the U.S. economy at risk.”
The lawmakers specifically highlight the dismissal of enforcement actions against major crypto exchanges Binance, Coinbase, and Kraken. These cases, built over years during the previous administration, represented some of the agency’s most significant attempts to regulate the crypto sector through existing securities laws.
The Money Trail
The crypto industry’s political spending reached historic levels during the 2024 election cycle. According to OpenSecrets, the sector invested $133 million in political campaigns, with substantial portions directed toward Trump’s presidential bid and other crypto-supporting candidates nationwide.
This financial backing came with explicit promises. During the Bitcoin 2024 conference, Trump declared he would embrace cryptocurrency technology and position the United States as the “crypto capital of the world.” The contrast with his predecessor’s approach could not be more stark.
Former SEC Chairman Gary Gensler, who led the agency during the Biden administration, became a villain figure within the crypto industry. Under his leadership, the commission pursued numerous enforcement actions against crypto companies and promoters, operating under the belief that widespread securities violations plagued the sector.
Legislative Success Follows Spending
The industry’s lobbying investments have already yielded concrete results. The GENIUS Act, focusing on stablecoin regulation, passed last year. Currently, the Senate is reviewing the CLARITY Act after it successfully passed through the House.
However, tensions have emerged even within the crypto-friendly landscape. The Senate Banking Committee delayed its markup of the CLARITY Act this week after Coinbase CEO Brian Armstrong publicly opposed the draft version. The delay reflects competing interests between traditional banking institutions and crypto companies, both seeking preferential treatment in the final legislation.
The TRON Exception
The House Democrats identify one potential opportunity for the SEC to demonstrate its independence. TRON founder Justin Sun’s enforcement action was stayed rather than dismissed, leaving room for the agency to continue pursuing the case.
Sun’s connections to Trump-affiliated crypto projects create potential conflicts of interest. He holds significant positions in World Liberty Financial’s WLFI token and the TRUMP memecoin. However, his relationship with Trump-affiliated entities has shown strain – World Liberty Financial previously froze his WLFI tokens after he moved $9 million worth, suggesting possible selling intentions.
“Honored to support @POTUS and grateful for the invitation from @GetTrumpMemes to attend President Trump’s Gala Dinner as his TOP fan!” Sun posted on social media. “As the top holder of $TRUMP, I’m excited to connect with everyone, talk crypto, and discuss the future of our industry.”
Pardons and Profits
President Trump faces corruption allegations regarding his pardon of former Binance CEO Changpeng “CZ” Zhao, who was serving time for anti-money laundering violations at the crypto exchange. The timing raises questions about potential quid pro quo arrangements.
Binance maintains approximately $2 billion worth of World Liberty Financial’s USD1 stablecoin on its platform. This relationship generates tens of millions in annual revenue for the stablecoin issuer, creating a significant financial incentive for maintaining favorable relationships with the administration.
The exchange expanded its USD1 integrations in December, further cementing ties between the platform and Trump-affiliated crypto projects.
Selective Mercy
The Samourai Wallet developers, who created privacy-focused bitcoin software, recently received prison sentences for money laundering-related charges. While they have requested a pardon, Trump has not granted one, stating only that their case would be reviewed.
Unlike Binance and other major crypto entities, the Samourai Wallet developers lack business relationships with Trump-affiliated projects. This distinction appears to influence the administration’s willingness to intervene on their behalf.
Broken Promises on Bitcoin
Despite Trump’s campaign promise to make the United States a “Bitcoin superpower,” his second term has focused primarily on enriching centralized crypto entities. The administration’s actions benefit major exchanges and Trump-affiliated projects rather than promoting Bitcoin’s decentralized principles.
The pattern suggests a shift from embracing cryptocurrency innovation to protecting established industry players with political connections. This approach contradicts the original promise of making America the global leader in Bitcoin adoption and technology.
Key Takeaways
The SEC’s retreat from crypto enforcement represents a fundamental shift in federal regulatory approach. With $133 million in political spending, the crypto industry has successfully influenced policy changes that benefit major players while potentially compromising investor protections. The dismissal of cases against Binance, Coinbase, and Kraken, combined with selective pardons and favorable legislation, creates an appearance of pay-to-play politics that House Democrats warn threatens both investors and the broader economy.
