This move is part of the SEC’s recent trend of dropping or pausing crypto-related cases, including those against Gemini, Coinbase and OpenSea. Gemini co-founder Cameron Winklevoss criticized the SEC’s aggressive stance, and called for reforms to prevent regulatory overreach. Meanwhile, former CFTC attorney Elizabeth Davis suggested that the CFTC is better suited to regulate meme coins, given its focus on fraud prevention.
SEC and Justin Sun Request Legal Pause
The United States Securities and Exchange Commission (SEC) and Justin Sun requested a federal court to pause the regulator’s case against the crypto entrepreneur to facilitate settlement discussions. A filing was submitted on Feb. 26 to a Manhattan federal court , which stated that both parties “jointly move to stay this case to allow the Parties to explore a potential resolution.” The filing pointed out that pausing the case is in the best interest of both parties while they consider a potential settlement. If granted, the SEC and Sun will be required to submit a joint status report within 60 days.
Justin Sun and SEC filing
This move is yet another instance of the SEC pausing its enforcement actions against crypto entities under the administration of President Donald Trump. The regulator also stayed or dismissed its cases against major crypto exchanges Binance and Coinbase. Trump has been vocal about his pro-crypto stance, and pledged during his campaign that he plans to reduce regulatory pressures on the digital asset industry and position the United States as the leading hub for crypto innovation.
The SEC is reportedly prioritizing crypto cases that have more pressing deadlines, and suggested that it may later stay its lawsuits against Kraken and Ripple, which have upcoming court deadlines in late March and mid-April. The case against Sun dates back to March of 2023, when the SEC filed a lawsuit against him and three of his companies—Tron Foundation, BitTorrent Foundation, and its San Francisco-based parent firm Rainberry Inc. The SEC accused them of selling unregistered securities through the sale of Tron (TRX) and BitTorrent (BTT) tokens. The regulator also alleged that Sun engaged in “manipulative wash trading” of these tokens on secondary markets.
Sun wanted to have the lawsuit dismissed by arguing that the SEC lacked jurisdiction over the matter as the token sales were predominantly conducted outside the United States. However, the SEC pushed back that Sun traveled extensively in the US, making him subject to its oversight.
Sun’s ties to Trump extend beyond legal battles. In fact, he is the largest investor in Trump’s crypto platform, World Liberty Financial. He first invested $30 million in November to become its primary backer and recently increased his stake with an additional $45 million purchase of the platform’s native token, WLFI. His total investment in the platform now stands at $75 million.
SEC Drops Investigation into Gemini
The SEC also officially closed its investigation into crypto exchange Gemini. On Feb. 26, Gemini co-founder and president Cameron Winklevoss shared a notice from the SEC stating that, based on the information available, the agency will not be recommending any charges against the firm. However, the SEC still made it clear that this decision does not constitute an exoneration and does not rule out future action should new information emerge.
The investigation stemmed from a Jan. 12, 2023, lawsuit in which the SEC accused Gemini and crypto lending firm Genesis Global Capital of offering unregistered securities through the “Earn” program. While the agency’s decision to stop its probe may provide some relief, Winklevoss is still frustrated over the impact the SEC’s actions had on Gemini and the broader crypto sector.
He stated that the regulator caused the firm to incur tens of millions of dollars in legal expenses while stifling innovation and economic growth. He also argued that the SEC’s aggressive stance against the crypto industry cost the United States valuable talent and investment.
The decision to close the Gemini case happened after similar moves by the SEC over the past few weeks. On Feb. 21, the regulator dropped its case against Coinbase. The same day, it also ended its investigation into NFT marketplace OpenSea. More recently, the SEC withdrew its scrutiny of Uniswap Labs, the developer behind the Uniswap decentralized exchange, and Robinhood Crypto, which received a Wells notice on May 4.
Winklevoss described the SEC’s reversal as another milestone in ending what he called the "war on crypto." However, he warned that the damage had already been done, as regulatory pressure likely stopped entrepreneurs and projects from entering the industry. To prevent similar incidents in the future, he called for legislative reforms to hold regulatory bodies accountable. He also proposed certain measures like dismissing SEC staff who were involved in baseless enforcement actions, barring them from future agency work, and compensating affected crypto firms for their legal expenses.
Overall, he criticized the SEC’s handling of the crypto sector, and argued that it was unacceptable for the agency to aggressively pursue an industry only to drop cases without consequence. While he acknowledged the decision as a positive step, he pointed out that it was only the beginning of ensuring these kinds of regulatory overreach does not happen again.
CFTC Could Take Charge of Meme Coin Regulation
Other regulators want to take on a more hands-on approach to the crypto space. A former chief attorney at the Commodity Futures Trading Commission (CFTC) believes the agency is best suited to regulate meme coins. Elizabeth Davis, a partner at Davis Wright Tremaine and former CFTC chief trial attorney, stated that the CFTC's focus on protecting retail market participants from fraud and manipulation makes it the ideal choice for overseeing meme coins.
The debate over meme coin regulation has intensified over the past few weeks, with former CFTC Chair Chris Giancarlo blaming the SEC for the current lack of order in the market. The SEC’s crypto task force head, Hester Peirce, previously stated that meme coins fall outside the agency’s jurisdiction. Davis suggested that the CFTC’s role will likely depend on broader digital asset regulations, but if the agency gains jurisdiction over the crypto spot market, meme coins will probably fall under its oversight. She is confident that upcoming US digital asset laws will provide clarity on the matter in 2025.
Davis also pointed out that the CFTC historically took an expansive approach to defining commodities under the Commodity Exchange Act, making it very likely that meme coins will be classified as commodities under its jurisdiction. The agency’s primary focus in regulating meme coins would be to prevent fraud and market manipulation.
Meme coins have been a hot topic in early 2025 due to high-profile launches like US President Donald Trump’s WLF token and the controversial Libra token associated with Argentine President Javier Milei. Because of increasing investor losses, many in the crypto community demanded clearer regulations to prevent reckless speculation. Meanwhile, Zak Folkman, co-founder of Trump’s crypto venture World Liberty Financial, criticized investors for making risky bets on meme coins, and stated that it is unwise to risk one’s life savings on speculative assets.
Adding to the controversy, reports from Argentina suggest that the US Department of Justice launched an investigation into the Libra token that was promoted by Milei, which only further intensifies the debate over regulatory oversight of the meme coin market.
