2023 Crypto Enforcement Trends: SEC & CFTC Set Records as States Take the Lead
Solidus Labs Research
SEC, CFTC, OFAC and 24 U.S. states announced more crypto-related enforcement actions in 2022 than in any year prior.
Key Findings
2022 was a rocky year for cryptocurrency. Prices crashed, Terra collapsed, FTX went bankrupt, and – Solidus research now shows – regulators engaged in more enforcement than in any other year in the industry’s history.
In 2022, the four main federal regulators with authority over cryptocurrency – the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC) – announced a combined 58 crypto-related enforcement actions, a 65% jump over 2021.
Number of crypto enforcement actions announced by US federal regulators
Bar chart with 4 data series.
CY 2013 - 2022
The SEC announced 30 crypto-related enforcement actions in 2022, more than any other regulator we identified worldwide. CFTC crypto enforcement, meanwhile, grew the most from year-to-year, with the number of actions they announced up 73% from 11 to 19.
From 2013 to 2022, the four federal agencies have imposed a combined $3.6 billion in fines against crypto market participants. The majority of these penalties – $3.4 billion – have been issued by the SEC and CFTC.
Fines imposed by US federal regulators
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Fines include penalties, disgorgements, and prejudgment interest
Many US states also set records last year. Regulators in 24 US states and the District of Columbia announced more crypto-related enforcement actions in 2022 than in any other year. 16 of these states also announced their first crypto-related enforcement action last year.
24 state regulators broke crypto enforcement records in 2022
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In the following sections, we analyze the enforcement activities of the most prolific state and federal crypto regulators, gleaning insight into:
- How their enforcement pace changed in 2022 compared to 2021
- The types of organizations and violations they prioritized
- What court cases and rule changes may expand or reduce their authority in 2023
SEC crypto enforcement
The SEC announced 30 crypto-related enforcement actions, imposed $242 million in monetary penalties, and filed civil cases in parallel with nine arrests in 2022. This is a 36% increase over the 22 actions they announced in 2021.
More than half of the firms that the SEC enforced against were either token issuers or crypto exchanges – an inevitable consequence of the SEC’s insistence that [nearly all] cryptocurrencies are securities.
Types of entities enforced against by the SEC in 2022
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Three key cases are helping to determine whether the agency's thesis will be validated by the US court system:
- SEC v. LBRY
- SEC v. Ripple
- SEC v. Wahi et al
SEC v. Ripple
In December 2020, the SEC filed a suit against Ripple and its current and former CEOs, claiming that the company’s sale of XRP represented an investment contract and therefore a type of securities offering.
Ripple’s Defense
- XRP does not meet the four prongs of the Howey test for determining whether an offering qualifies as an investment contract.
- The SEC does not have jurisdiction, because “virtually all” XRP was sold on foreign exchanges.
SEC v. Wahi
In July 2022, the SEC brought its first-ever crypto insider trading charges against three individuals: former Coinbase employee Ishan Wahi, his brother Nikhil and their friend Sameer Ramani.
CFTC crypto enforcement
From calendar year 2015 to 2022, the CFTC initiated at least 49 crypto-related enforcement actions and levied fines and disgorgements totaling nearly $900 million.
Returning to the calendar year view, the CFTC announced 19 crypto-related enforcement actions and brought civil suits alongside four arrests in 2022. This is up 73% from the 11 actions it announced in parallel with just one arrest in 2021.
CFTC v. Avraham Eisenberg: A foot in DeFi’s door
CFTC v. Ooki DAO: The first action against a DAO
FinCEN crypto enforcement
From 2015 to 2022, FinCEN announced just five actions in total, the most recent of which was a $29 million civil penalty. All five charges have been the result of violations of the Bank Secrecy Act (BSA).
OFAC crypto enforcement
OFAC announced eight crypto-related enforcement actions in 2022, up 60% from the five it announced in 2021. It also initiated sanctions against three new categories of crypto services last year – darknet markets, bitcoin miners, and crypto mixers.
State crypto enforcement
State crypto enforcement largely began in 2018 with the kickoff of the North American Securities Administrators Association’s (NASAA’s) “Operation Cryptosweep.”
Number of crypto enforcement actions announced by US state regulators
Map of United States of America with 1 data series.2013-2022
States versus federal crypto enforcement activity
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The most active states: Texas & Alabama
The Alabama Securities Commission (ASC) and the Texas State Securities Board (TSSB) tied for the highest number of crypto enforcement actions announced by any state regulator in 2022, filing six cases apiece.
Crypto enforcement takeaways for 2023
- The CFTC’s crypto enforcement pace accelerated by 73% year-on-year, the fastest of any federal regulator.
- Regulators in 24 states and the District of Columbia broke crypto enforcement records in 2022.
- The SEC announced 30 crypto-related enforcement actions in 2022.
- OFAC sanctioned crypto service providers like mixers and miners for the very first time in 2022.
- FinCEN’s upgraded whistleblower program and enhanced ability to combat Russian money laundering gave the agency renewed strength in 2022.
Methodology
Solidus gathered the information contained in this research entirely from public data sources – including the websites of SEC, CFTC, FinCEN, OFAC, and banking and securities regulators from all 50 US states and District of Columbia. Only standalone, civil enforcement actions against entities accused of violations involving crypto have been counted.
This report has been compiled for informational and educational purposes only and should not be construed as investment or legal advice. While the information provided is believed to be accurate, it may include errors or inaccuracies.