Democrats press SEC over dropped crypto lawsuits

The liberal lawmakers are accusing the US Securities and Exchange Commission (SEC) of abandoning crypto enforcement cases and blindly falling in line with the demands of crypto executives.

Democratic Party representatives in the Financial Services Committee sent a letter to SEC Chairman Paul Atkins, asking the regulator if it knowingly retreated from enforcing laws on Coinbase, Binance, and Kraken.

The policymakers, led by Rep Maxine Waters, said the commission has dismissed or closed at least a dozen crypto-related cases, including actions it had previously deemed legally sound. Several of those cases had already survived motions to dismiss and received favorable rulings from federal judges.

“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. Frankly, it puts both investors and the US economy at risk,” wrote the representatives. 

SEC left cases with clear probable cause, lawmakers argue

In the letter, Democrats bashed the SEC for turning away from “meritorious” litigation even though the courts had already validated the commission’s claims. The lawmakers said this pattern has fueled perceptions that enforcement decisions are being influenced by outside interests and the Trump administration. 

Waters and her colleagues mentioned that the Commissions’ actions occurred while crypto executives and firms gave financial support to the US president and his allies. But according to the letter, securities laws require the Commission to protect market participants, regardless of their political biasness.

They devoted significant attention to the SEC’s dismissal of its case against Binance after it sued the crypto exchange and its founder, Changpeng Zhao, in June 2023 for securities violations.

The entity accused the company of deceptive practices, conflicts of interest, and running businesses in America without proper registration. Zhao pleaded guilty to criminal charges related to Bank Secrecy Act violations in Binance’s compliance failures and served a prison term, which he was pardoned for by US President Trump last year.

In June 2024, US District Judge Amy Berman Jackson upheld most of the SEC’s allegations and allowed the case to proceed. The court found that the regulator had plausibly alleged fraud and unregistered securities activity in its token listings and services.

Despite that ruling, the SEC dismissed the case with prejudice in May 2025 while “exercising discretion,” away from a judgment on the merits of its claims.

Liberals said the dismissal was concerning, given the seriousness of the allegations and the court’s findings, in addition to the Trump administration’s pardon of Zhao, claiming the POTUS was making sure he and his companies “would avoid accountability.”

Coinbase and Kraken cases were also dropped

The documents also talked about the Commissions’ retreat from its actions against Coinbase and Kraken, where federal judges had also shunned the companies’ attempts to dismiss the lawsuits, much like the Binance case.

The SEC charged Coinbase in June 2023 with operating as an unregistered exchange, broker, and clearing agency, alongside failing to register its staking services. In the following year, a federal judge sided with the Commission and ruled that certain tokens sold on Coinbase qualified as securities under federal law.

Fast forward to February last year, the commission reached an agreement with the US-based crypto trading platform to dismiss the case, citing the pending work of its Crypto Task Force as justification for ending the litigation.

Kraken was facing similar allegations in a lawsuit filed in 2023, but the Commission and Kraken jointly moved to dismiss the case last March. 

FSC members Rep. Waters, Sean Casten, and Brad Sherman surmised that the choice to drop cases against crypto firms came at a time when political donations were pouring into the US government, with at least $85 million to President Trump’s reelection campaign.

The firms whose cases or investigations were dismissed included Coinbase, Kraken, Ripple, Robinhood, and Crypto.com, which all supposedly donated at least $1 million to Trump’s inauguration each.

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