When the SEC Won't Act: Private Litigation Options for Crypto Investors

In 2025, the SEC walked away from crypto enforcement. The Commission dismissed or closed at least twelve cases -- Coinbase, Kraken, Consensys, and Binance among them -- with the Binance dismissal entered with prejudice.¹ Enforcement actions fell sixty percent, from thirty-three in 2024 to thirteen in 2025.² Monetary penalties collapsed from $4.98 billion to $142 million. The agency renamed its crypto enforcement unit, cut staff from fifty to thirty, and for the first time since 2018, omitted cryptocurrency entirely from its examination priorities.³

If you lost money on a token offering, a collapsed exchange, or a DeFi protocol that promised what it couldn't deliver -- this might feel like the door just closed. It didn't. It shifted. The SEC's retreat is a policy choice, not a legal change. No statute was repealed. No court overruled the Howey test. The GENIUS Act covers stablecoins only; broader market structure legislation remains stalled in the Senate. The law that made your token a security last year still makes it a security today.

Private litigation is now the primary accountability mechanism in crypto. In the first half of 2025 alone, crypto securities class action filings nearly matched the entire 2024 total.⁴ Settlements are proving viability: Silvergate paid $37.5 million, BlockFi $13.25 million, DraftKings $10 million, and Shaquille O'Neal's Astrals NFT project $11 million.⁵ Courts are certifying classes, granting discovery, and letting cases proceed. This article maps the legal toolkit available to crypto investors when the regulator won't act -- and explains why the window for some claims is closing now.

Key Takeaways

• The SEC's retreat is a policy choice, not a legal change -- Howey still applies, no statute has been repealed, and the SEC-CFTC joint guidance expressly reaffirms it.
• Section 12(a)(1) is the strongest tool for investors -- strict liability, rescission remedy, no fraud proof needed, and courts are certifying these classes now.
• Centralized vs. decentralized matters -- centralized exchanges can be statutory sellers; decentralized protocol developers generally cannot.
• California state claims are underappreciated -- Corporations Code sections 25501 and 25503 require no scienter or reliance and now carry mandatory attorney fees.
• Statutes of limitations are running now -- Section 12(a)(1) has a one-year/three-year window from the sale, not from discovery. Claims from 2022-era token sales are hitting repose.

What Does the SEC's Crypto Retreat Actually Mean?

The SEC has stopped enforcing crypto securities laws, but the legal framework that makes tokens securities remains fully intact. What changed is the enforcer, not the law.

The retreat is structural, not just statistical. The SEC renamed its Crypto Assets and Cyber Unit to the Cyber and Emerging Technologies Unit, cutting staff from roughly fifty to thirty.⁶ It dismissed cases against Coinbase, Kraken, and Consensys by joint stipulation, and dismissed the Binance case with prejudice -- meaning the agency cannot refile those claims.⁷ It dropped its appeal in Ripple.⁸ Commissioner Crenshaw, dissenting, described the approach as a "programmatic disassembly of the SEC's crypto enforcement program."⁹

The decline is accelerating. The SEC brought forty-six crypto enforcement actions in 2023, thirty-three in 2024, and thirteen in 2025 -- the lowest since the agency began treating digital assets as a priority.¹⁰ Penalties fell from $281 million in 2023 to $142 million in 2025, with the 2024 figure of $4.98 billion inflated by the Terraform Labs settlement alone.

None of this changes the underlying law. The Howey test -- which asks whether a transaction involves "an investment of money in a common enterprise with profits to come solely from the efforts of others" -- remains binding Supreme Court precedent.¹¹ That framework determines whether a digital asset is a security, and no court has disturbed it. Congress has not repealed any provision of the Securities Act or Exchange Act. The GENIUS Act, signed in July 2025, addresses stablecoins only.¹² The CLARITY Act, which would establish a broader market structure framework, passed the House but stalled in the Senate.¹³ And the SEC's own joint guidance with the CFTC, issued in March 2026, expressly reaffirms Howey as the controlling standard.¹⁴

If you bought tokens in an offering that was never registered -- the legal violation hasn't disappeared because the SEC stopped enforcing it.

What Private Claims Can Crypto Investors Bring?

Crypto investors can bring federal securities claims under Section 12(a)(1) and Rule 10b-5, California state securities and UCL claims, and common law actions for breach of contract and fraud. But which claims are available -- and against whom -- depends on a distinction that two recent federal court decisions have sharpened: whether the defendant operates a centralized platform or a decentralized protocol.

The Centralized vs. Decentralized Framework

In February 2025, the Second Circuit affirmed dismissal of federal securities claims against Uniswap's developers in Risley v. Universal Navigation, holding that deploying autonomous smart contract code does not make a developer a statutory seller. The court found it "defies logic" to hold a smart contract drafter liable for a third party's use of the platform.¹⁵ The decision was issued as a summary order -- persuasive but not binding precedent in the Second Circuit.

Days earlier, Judge Engelmayer in the Southern District of New York reached the opposite conclusion for centralized exchanges. In Underwood v. Coinbase, the court held that a centralized exchange that intermediates transactions between buyers and sellers is a plausible statutory seller under Section 12(a)(1), applying the Supreme Court's two-prong test from Pinter v. Dahl.¹⁶

The framework is now clear. Centralized intermediaries -- exchanges, token issuers, promoters, and entities that actively facilitate sales -- face direct exposure. Developers of truly autonomous, open-source protocols generally do not. And where governance participants actively manage a nominally decentralized project, courts are looking through the label: in Samuels v. Lido DAO, the Northern District of California held that a DAO could be treated as a general partnership, exposing governance participants -- including venture capital firms like a16z and Paradigm -- to personal liability. As the court put it: "These are not the actions of an autonomous software program -- they are the actions of an entity run by people."¹⁷

With that framework in place, here are the primary causes of action.

Section 12(a)(1): Unregistered Securities Sale

This is the strongest tool in the toolkit. Section 12(a)(1) of the Securities Act imposes strict liability on anyone who "offers or sells a security" without registration -- no fraud, no scienter, no reliance required.¹⁸ Under the Supreme Court's Pinter v. Dahl framework, a "seller" includes anyone who "passed title, or other interest in the security, to the buyer for value" or who "successfully solicited the purchase, motivated at least in part by a desire to serve his own financial interests."¹⁸ The remedy is rescission: the buyer gets their purchase price back. The seller's intent is irrelevant. The only questions are whether the asset is a security and whether the defendant sold it.

Courts are certifying classes on this theory. In August 2025, the Central District of California certified four state subclasses in the EthereumMax litigation on unregistered securities claims.¹⁹ In March 2025, the Middle District of Florida certified a class in the LGBCoin case on the same theory -- that case is now heading to trial.²⁰

The critical limitation is the statute of limitations. Section 12(a)(1) carries a one-year limitations period from the violation and a three-year statute of repose, running from the date of sale -- not from the date you discovered the problem.²¹ For tokens sold during the 2021-2022 boom, the three-year repose window is closing now.

Federal Securities Fraud: Section 10(b) and Rule 10b-5

Where the defendant made affirmative misrepresentations -- not just sold an unregistered token -- Section 10(b) and Rule 10b-5 provide a fraud-based cause of action. The elements are more demanding: a material misrepresentation or omission, scienter, reliance, economic loss, and loss causation.²² The Private Securities Litigation Reform Act imposes heightened pleading requirements, and the Supreme Court's Tellabs standard requires that the inference of scienter be at least as compelling as any opposing inference.²³

The tradeoff is a longer limitations window: two years from discovery of the violation, with a five-year statute of repose.²⁴ Use this claim when the facts support fraud -- misleading whitepapers, fabricated partnerships, undisclosed insider selling -- not just failure to register.

California State Securities Claims

For transactions with a California nexus, state securities law offers significant advantages. Corporations Code section 25501 creates a private right of action for fraud in securities transactions without requiring scienter -- the burden shifts to the defendant to prove reasonable care.²⁵ Section 25503 imposes strict liability for unregistered sales, paralleling federal Section 12(a)(1) but with a more favorable limitations period: two years from discovery, five years from the sale.²⁶

Since 2022, both sections carry mandatory attorney fee awards to prevailing plaintiffs.²⁷ And unlike federal claims, California state securities actions are not subject to the PSLRA's heightened pleading requirements. Courts are applying these provisions to crypto: in Cress v. Nexo, the Northern District of California sustained Section 25503 claims against a crypto lending platform.²⁸

California UCL (Business and Professions Code Section 17200)

The Unfair Competition Law is the broadest tool in the California toolkit. Its unlawful prong borrows any underlying securities violation; its unfair and fraudulent prongs operate independently.²⁹ No individual reliance is required, making class treatment straightforward.³⁰ The four-year statute of limitations is the longest available option.³¹

The limitations are real: remedies are restricted to restitution and injunction, with no compensatory damages available.³² But the UCL's value is strategic. In Kramer v. Coinbase, the California Court of Appeal held that UCL claims seeking public injunctive relief survive arbitration clauses -- meaning the UCL can keep cases in court when other claims get pushed to arbitration.³³

Common Law Claims

Breach of contract, fiduciary duty, and common law fraud round out the toolkit. Contract claims turn on the enforceability of token purchase agreements and platform terms of service -- the distinction between clickwrap and browsewrap agreements often determines the outcome. Fiduciary duty claims exist where a platform promises asset segregation, as in the Silvergate litigation, but not where terms of service transfer ownership of deposited assets to the platform, as courts found in the Celsius bankruptcy.³⁴ Common law fraud is flexible -- no securities classification required -- but demands individual proof of reliance, making class treatment difficult.

Which Claim Fits Your Situation?

The right claim depends on what happened, not just how much you lost. Start with the facts.

Why Are Private Crypto Suits Succeeding Now?

The SEC enforcement vacuum, clarified case law, successful class certifications, cracking arbitration defenses, and growing litigation funding are converging to make 2026 the most favorable environment for private crypto suits since digital assets entered the securities landscape.

The enforcement vacuum is the most obvious factor. When the SEC was actively pursuing crypto cases, defendants could argue -- and courts could reason -- that the government was already addressing the harm. That argument is gone. Oregon's Attorney General made the point explicitly, filing a state securities action against Coinbase in April 2025, weeks after the SEC dismissed its own case.³⁵

The doctrinal landscape has also clarified. The centralized-versus-decentralized framework described above gives plaintiffs a roadmap for identifying viable defendants. Firms that previously hesitated on crypto cases now have the legal footing to proceed.

Class certification is succeeding. The EthereumMax and LGBCoin rulings discussed in the previous section demonstrate that Section 12(a)(1) claims are certifiable -- and class certification transforms the economics. A claim that is not worth pursuing individually becomes viable when aggregated across thousands of purchasers.

Arbitration -- the biggest practical obstacle in crypto litigation -- is cracking. In Williams v. Binance, a court denied arbitration in February 2026 based on deficient notice of the arbitration clause.³⁶ In Young v. Solana Labs, the Ninth Circuit rejected equitable estoppel, holding that a token issuer cannot force arbitration through an exchange's terms of service that the issuer did not sign.³⁷ These decisions don't eliminate arbitration as a defense, but they narrow the pathways available to defendants.

Settlements are validating the model. The Silvergate, BlockFi, DraftKings, and Astrals recoveries demonstrate that private crypto securities cases produce real money for investors -- not just headlines. And the litigation funding market is expanding the plaintiff-side capacity to bring these cases: third-party litigation funding reached $18.9 billion deployed in 2025, with projections of $67 billion by 2037.³⁸

The sophistication of claims is escalating. The Pump.fun action against Solana and Jito Labs -- seeking $4 to $5.5 billion under RICO, backed by a whistleblower who produced five thousand internal messages -- represents a new tier of private crypto enforcement.³⁹ Whether that case succeeds on its theory or not, it signals that the private bar is investing serious resources in crypto claims.

The legal infrastructure for private crypto litigation is more developed than most investors realize. The question is when you file, not whether you can.

What Should Crypto Investors Do Right Now?

Preserve evidence, check statutes of limitations, calculate losses, identify defendants, and consult securities litigation counsel. The order matters -- evidence preservation comes first because everything else depends on having the record.

Understand Your Deadlines

Statutes of limitations are the single biggest risk to otherwise valid claims. The windows vary by cause of action, and some are already closing:

The critical deadline: Section 12(a)(1)'s three-year repose runs from the date of sale, not from discovery. For tokens purchased in 2022 and early 2023, that window is closing now. No tolling doctrine extends it. If you are considering a claim based on an unregistered sale, this deadline should drive your timeline.

Preserve Your Evidence

Blockchain transactions are permanent, but the evidence that matters most in securities litigation is often off-chain: marketing materials, whitepaper promises, Discord and Telegram messages, email communications, platform terms of service at the time of purchase, and account statements showing deposits and withdrawals. Platforms shut down. Servers go offline. Screenshots and archived web pages taken today may be the only record available at trial.

Calculate Your Losses

Document your purchase price, the date of each transaction, any partial recovery or withdrawal, and the current value of your holdings. For Section 12(a)(1) rescission claims, the measure is straightforward: the purchase price minus any amount received back. For fraud claims, loss causation requires connecting the decline in value to the specific misrepresentation -- not just general market movement.

Identify Your Defendants

Who sold the token? Who made the representations you relied on? Where are they located? The centralized-versus-decentralized framework from Risley and Underwood determines which entities are viable targets. Centralized exchanges, token issuers, project foundations, celebrity promoters, and active DAO governance participants are all potential defendants. Anonymous developers of fully decentralized protocols generally are not.

Consult Litigation Counsel

Securities litigation is specialized. The attorney you need is not the one who helped you set up your LLC or reviewed your token purchase agreement. Look for counsel with experience in federal securities class actions, familiarity with the crypto-specific case law, and the resources to litigate against well-funded defendants. Plaintiff-side securities firms typically work on contingency, meaning no upfront cost to the investor.

Evidence preservation is the single highest-ROI action you can take right now. Everything else depends on having the record.

Looking Ahead

The SEC's retreat from crypto enforcement is not permanent. Administrations change. Commissioners rotate. The pendulum will swing back. But the investors who lost money in 2021, 2022, and 2023 cannot wait for a future enforcement regime to vindicate their claims. Statutes of limitations do not pause for policy cycles.

Private litigation fills the vacuum that regulators leave. The tools exist -- Section 12(a)(1) for unregistered sales, 10b-5 for fraud, California state claims for transactions with a West Coast nexus, and the UCL for the broadest reach. The courts are receptive: classes are being certified, arbitration defenses are narrowing, and settlements are delivering real recoveries. The legal infrastructure is more developed than at any point in crypto's history.

The window is open. For the oldest claims, it is closing. Complex crypto disputes require counsel who understands both the technology and the courtroom. The analysis starts with the facts.

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Disclaimer: This article provides general information for educational purposes only and does not constitute legal advice. Securities litigation is complex and fact-specific. Consult qualified legal counsel for advice on your specific situation.

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Footnotes

1. Securities and Exchange Commission, Press Release 2025-47 (Feb. 27, 2025) (Coinbase dismissal); SEC Litigation Release LR-26316 (May 29, 2025) (Binance dismissal with prejudice). ↩

2. Cornerstone Research, "SEC Cryptocurrency Enforcement: 2025 Update" (2025). ↩

3. Securities and Exchange Commission, Press Release 2025-42 (Feb. 20, 2025) (renaming Crypto Assets and Cyber Unit to Cyber and Emerging Technologies Unit; staff reduction); Press Release 2025-132 (Nov. 17, 2025) (2026 examination priorities omitting cryptocurrency). ↩

4. Cornerstone Research, "Securities Class Action Filings: 2025 Midyear Assessment" (2025) (six crypto class actions filed in H1 2025; seven total in all of 2024). ↩

5. Cohen Milstein, "Court Approves $37.5M Settlement with Silvergate" (Sept. 2025); BlockFi Securities Settlement, $13.25M (D.N.J. Aug. 2025); Harper v. O'Neal, $11M (S.D. Fla. Apr. 2025); Dufoe v. DraftKings, $10M (D. Mass. July 2025). ↩

6. Securities and Exchange Commission, Press Release 2025-42 (Feb. 20, 2025). ↩

7. Securities and Exchange Commission, Press Release 2025-47 (Feb. 27, 2025) (Coinbase); SEC Litigation Release LR-26316 (May 29, 2025) (Binance, dismissed with prejudice). ↩

8. Securities and Exchange Commission, SEC v. Ripple Labs, Inc., Litigation Release LR-26369 (Aug. 7, 2025). ↩

9. Commissioner Caroline A. Crenshaw, dissenting statement on crypto enforcement policy (2025). ↩

10. Cornerstone Research, "SEC Cryptocurrency Enforcement: 2025 Update" (2025). ↩

11. SEC v. W.J. Howey Co., 328 U.S. 293 (1946). ↩

12. GENIUS Act, S.1582, 119th Congress (signed July 18, 2025). ↩

13. CLARITY Act, H.R. 3633, 119th Congress (passed House July 2025; Senate pending). ↩

14. Securities and Exchange Commission and Commodity Futures Trading Commission, Joint Staff Guidance on Digital Asset Classification (Mar. 2026). ↩

15. Risley v. Universal Navigation Inc., No. 23-1340-cv (2d Cir. Feb. 26, 2025) (summary order). ↩

16. Underwood v. Coinbase Global, Inc., No. 21-cv-08353 (S.D.N.Y. Feb. 7, 2025) (denying motion for judgment on the pleadings). ↩

17. Samuels v. Lido DAO, No. 3:23-cv-06492 (N.D. Cal. Nov. 18, 2024) (denying motions to dismiss); id. (Sept. 3, 2025) (finding waiver of arbitration). ↩

18. Securities Act Section 12(a)(1), 15 U.S.C. 77l(a)(1); Pinter v. Dahl, 486 U.S. 622 (1988). ↩ ↩²

19. In re EthereumMax Investor Litigation, No. 2:22-cv-00163 (C.D. Cal. Aug. 7, 2025) (certifying California, New York, New Jersey, and Florida subclasses on unregistered securities claims). ↩

20. De Ford v. Koutoulas, No. 6:22-cv-00652 (M.D. Fla. Mar. 28, 2025) (certifying class on Section 12(a)(1) claims). ↩

21. Securities Act Section 13, 15 U.S.C. 77m. ↩

22. Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005). ↩

23. Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). ↩

24. 28 U.S.C. 1658(b). ↩

25. Cal. Corp. Code 25501; see Moss v. Kroner, 197 Cal. App. 4th 860 (2011) (burden-shifting framework). ↩

26. Cal. Corp. Code 25503; Cal. Corp. Code 25506(b) (limitations). ↩

27. Cal. Corp. Code 25501, 25503 (as amended by AB 826, effective 2022). ↩

28. Cress v. Nexo Financial LLC, No. 3:22-cv-08413 (N.D. Cal. 2024). ↩

29. Cal. Bus. & Prof. Code 17200. ↩

30. In re Tobacco II Cases, 46 Cal. 4th 298 (2009). ↩

31. Cal. Bus. & Prof. Code 17208. ↩

32. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003). ↩

33. Kramer v. Coinbase, Inc., 104 Cal. App. 5th 1204 (2024). ↩

34. See Bhatia v. Silvergate Capital Corp. (S.D. Cal.) (fiduciary duty based on asset segregation promises); In re Celsius Network LLC, No. 22-10964 (Bankr. S.D.N.Y. 2023) (ToS transferred ownership of deposited crypto to platform). ↩

35. Oregon Department of Justice, State v. Coinbase Global, Inc. (filed Apr. 2025). ↩

36. Williams v. Binance Holdings Ltd. (Feb. 2026) (denying motion to compel arbitration based on deficient notice). ↩

37. Young v. Solana Labs, Inc. (9th Cir. Oct. 20, 2025) (rejecting equitable estoppel; token issuer cannot enforce non-signatory exchange's arbitration clause). ↩

38. GLS Capital, "Litigation Finance Market Report" (2025) ($18.9 billion deployed; $67 billion projected by 2037). ↩

39. Combs v. Pump.fun, et al. (S.D.N.Y. 2025) (RICO claims seeking $4-5.5 billion; whistleblower produced approximately 5,000 internal communications). ↩