SEC Says Past Crypto Crackdowns Missed Investor Protection

The SEC shifted its approach under Chair Paul Atkins toward prioritizing cases involving fraud, market manipulation, and other high-impact misconduct. At the same time, seven US lawmakers have asked the Commodity Futures Trading Commission and its chair Michael Selig to explain its oversight of prediction markets, due to concerns about possible insider trading tied to event contracts related to military conflicts.

SEC Rethinks Crypto Crackdowns

The US Securities and Exchange Commission (SEC) acknowledged that many past actions may not have delivered meaningful benefits to investors. In a statement outlining its 2025 enforcement results, the regulator revealed that since the 2022 fiscal year it had pursued 95 cases related to “book-and-record violations,” which resulted in $2.3 billion in penalties. 

Press release from the SEC

However, the agency conceded that several of these cases, including those involving crypto firms, did not identify direct investor harm or produce tangible investor protection outcomes. The SEC also admitted that its previous strategy reflected a bias toward the volume of cases rather than their actual impact. 

According to the agency, this approach led to a misallocation of resources and, in some instances, a misinterpretation of federal securities laws. This admission is a clear departure from the regulatory stance under former SEC Chair Gary Gensler, who was widely criticized for pursuing what many in the crypto industry described as “regulation by enforcement.”

Under the leadership of current SEC Chair Paul Atkins, the agency shifted its focus toward prioritizing cases that offer genuine investor protection. Atkins placed a lot of emphasis on the fact that the SEC is now concentrating on misconduct that causes significant harm, like fraud, market manipulation, and breaches of trust, rather than pursuing large volumes of cases aimed at generating headlines or record penalties. 

This change aligns with the overall  recalibration of enforcement strategy after the lead-up to Donald Trump’s 2025 inauguration, during which the SEC described its prior enforcement activity as an “unprecedented rush.”

Data from Cornerstone Research supports this shift, and indicates that enforcement actions against public companies, including crypto firms, declined by roughly 30% in fiscal 2025 compared to the previous year. Despite the reduction in case volume, the SEC still secured impressive monetary relief, totaling $17.9 billion, including $7.2 billion in civil penalties.

SEC enforcement actions (Source: Cornerstone Research)

While the agency is moving toward a more measured enforcement approach, it is still taking action against serious violations in the crypto space. In May of 2025, Unicoin and several of its executives were sued for allegedly misleading investors in a $100 million fundraising scheme. The SEC also pursued a case against Ramil Ventura Palafox, accused of orchestrating a $200 million Ponzi scheme, which resulted in a 20-year prison sentence.

Lawmakers Press CFTC on Prediction Market Oversight

The CFTC’s approach to enforcement is also attracting some attention. Seven members of the US House of Representatives raised concerns over the handling of insider trading risks in prediction markets, and called on Commodity Futures Trading Commission Chair Michael Selig to explain what they describe as regulatory inaction. 

In a formal letter, the lawmakers argued that the agency has clear authority under the Commodity Exchange Act to regulate event contracts and prediction markets, particularly to prevent abuse of swap provisions. While they acknowledged the CFTC’s jurisdiction over these markets, they questioned whether the regulator is actually doing enough to police suspicious activity tied to sensitive geopolitical events.

Part of the letter that was sent to CFTC Chair Michael Selig

The lawmakers specifically mentioned concerns around so-called “morally obscene” contracts linked to wars and military actions, including those involving potential US interventions in countries like Iran and Venezuela. 

According to the letter, certain trades appeared to align closely with real-world developments, which raises suspicions that some market participants may have had access to non-public or privileged information. 

The criticism comes during an ongoing legal and regulatory battle over the status of prediction market platforms like Kalshi and Polymarket. While the CFTC maintains that these event-based contracts qualify as swaps under federal law, several US states have challenged this interpretation by arguing that the platforms resemble unregulated gambling operations. 

Adding to the pressure, the lawmakers explained that allowing such contracts to continue trading without stricter oversight could undermine both market integrity and public trust. They warned that failure to act decisively could signal a lack of capacity or willingness by the CFTC to fulfill its global regulatory responsibilities. The group requested detailed responses from Selig, including clarification on enforcement priorities and oversight mechanisms, with a deadline set for mid-April.

At the same time, the CFTC acknowledged the risks associated with insider trading in prediction markets but appears to be taking a more measured approach. Enforcement Director David Miller has stated that the agency will prioritize cases involving clear misuse of non-public information, rather than dedicating resources to what it considers minor or “trivial” violations.