US digital asset disputes updater: Exploring the latest cases, regulatory developments, and legal trends

Key Takeaways:

• The SEC settles with Digital Currency Group
• Civil lawsuit initiated against memecoin exchange
• Outgoing SEC administration issues a slew of actions before inauguration

Recent Legal Developments

Crypto has had a wild past few weeks—right before a change of administration, there was a flurry of activity from the SEC, and now with the inauguration of President Trump, still more changes. There’s a new crypto task force, a repeal of SAB 121, and so much more. These agency developments, while important, are covered in greater detail on NRF’s US Regulatory Intelligence page. In keeping with the focus of this blog, this updater will look to general litigation trends. 

We’re noticing a couple of major litigation shifts following the administration changeover: agency settlements, civil litigation, and new lawsuits against the government. Of particular note is the turn toward civil litigation: we imagine that these cases, though many in number currently, will only become more common. 

SEC Settles with DCG

Just ahead of the incoming Trump administration, the SEC on January 17 announced a settlement with Digital Currency Group for $38 million. The relevant action related to DCG’s activities with the now-defunct Three Arrows Capital, which failed in 2022. In the settlement filing, DCG was ordered to “cease and desist from committing or causing any violations and any future violations of Section 17(a)(3) of the Securities Act,” as well as pay a $38 million fine.

Insight: There were a number of agency settlements before the Trump administration took office. Though not explicitly significant—these settlements may have been in the works for some time—the fact that they occurred ahead of the incoming administration nevertheless means something. Moreover, with actions like this one against DCG wound down, regulators may choose to focus on different priorities now. 

Civil Lawsuit Initiated Against Pump.Fun

On January 16, civil litigation against the memecoin exchange Pump.Fun was initiated by purchasers of tokens on the platform. The lawsuit focuses on the PNUT memecoin token, but also delves into a securities analysis. Accusing Pump.Fun of “actively promot[ing] PNUT through a systematic campaign designed to drive speculative investment,” the plaintiffs alleged that all transactions on Pump.Fun fit into the Howey test as investment contracts. To that end, the plaintiffs alleged violations of Section 12(a)(1) of the Securities Act.

Insight: With the memecoin craze spreading, it was only a matter of time until civil lawsuits reared their heads. These lawsuits are interesting, with some crypto lawyers predicting that actions like these will fill in for the SEC and CFTC’s enforcement actions. While we don’t predict a complete shift, it is likely that more civil litigation will be taken up as Securities Act Section 12(a) jurisprudence is further fleshed out. 

The Outgoing Gensler SEC Act

Just before Trump’s inauguration and the changing of the guard, the SEC announced several actions: it initiated an enforcement action against Nova Labs, filed its appeal challenging the dealer rule’s vacatur, and submitted its principal brief in its enforcement action appeal against Ripple Labs. 

Insight: Call it a parting shot, perhaps? The outgoing Gensler SEC’s flurry of activity is likely the result of months of work, so we’d not like to read too much into these activities. With that said, however, they are still significant when juxtaposed against the slew of regulatory actions the SEC has undertaken since the changing of the guard—SAB 121’s repeal, the above DCG settlement, Commissioner Peirce’s crypto task force, to name a few. It will be interesting to see what becomes of these parting actions under the new administration.

The Mempool: Noteworthy Reads and Listens:

• Steven Lofchie’s A Quick and Dirty Fix for US Cryptocurrency Regulation: NRF’s Steven Lofchie has tackled the question of “what comes next?” for crypto now that the Gensler regulatory regime is over. His work probes the past regulatory environment for crypto, the SEC’s missteps, and even proposes a potential framework for crypto legislation.
• Blockchain Association’s Amicus Brief in SEC v. Balina: The Blockchain Association, among other industry members, recently submitted an amicus brief in SEC v. Balina, a case dealing with extraterritorial application of securities laws. Nothing that “the district court essentially gave the SEC worldwide enforcement powers,” the Blockchain Association expressed its concerns. This case is one to watch—particularly for its implications regarding Morrison v. Australia National Bank.
• NRF’s 2024 Review and 2025 Outlook for Digital Asset Disputes: Alongside our international colleagues, we’ve also helped publish our 2024 review and 2025 outlook for digital asset disputes. We delve into trends from 2024 and where we think those trends may lead heading into this year. As noted above, civil litigation will be one big area to watch!

If you have any questions about these developments or your own digital asset-related litigation matters, please contact NRF Digital Asset Disputes Partner Eric Martin or Associate Gage Raju-Salicki to set up some time to discuss your questions.