Democrats Press SEC Over Dropped Crypto Lawsuits - Regulatory Pressure Mounts in 2026

Washington turns up the heat on crypto oversight as political scrutiny meets market momentum.

The Regulatory Standoff

Democrats are turning the screws on the Securities and Exchange Commission, demanding answers on why key cryptocurrency enforcement actions got the axe. It's a political power play hitting right as digital assets cement their role in the global financial system.

Behind Closed Doors

The pressure campaign isn't about killing innovation—it's about demanding consistency. Lawmakers want to know if dropped cases represent a policy shift, internal discord, or just the usual bureaucratic inertia. Meanwhile, the market barely flinches, treating regulatory theater as background noise to its own relentless climb.

The Bigger Picture

This isn't just political posturing. It's a symptom of the growing pains every transformative technology faces. Traditional finance gatekeepers scrambling to apply old rules to a new paradigm—like trying to regulate the internet with telegraph laws. The irony? All this scrutiny just proves crypto's moved from fringe to mainstream.

One cynical take? Washington's finally paying attention now that there's real money on the table—nothing focuses political minds like the scent of taxable revenue and donor portfolios packed with digital assets. The lawsuits might get dropped, but the oversight game has only just begun.

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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