In the spring of 2021, the U.S. Securities and Exchange Commission got a new chairman — a man who had spent the previous few years teaching a blockchain and cryptocurrency course at MIT. The industry exhaled: finally, a regulator who actually understood the technology. Four years later, that same industry treated Gary Gensler as its personal villain, and general counsels at major exchanges kept his name filed under "adversary." How did technical fluency turn into the most aggressive regulatory campaign crypto has ever faced in the United States — and how did that campaign end for the people who weren't even parties to it, just holders with tokens sitting on an exchange?
The professor who came to judge
Gensler wasn't a random appointee. Before the SEC, he taught "Blockchain and Money" at MIT Sloan, walked through the technology line by line, and praised Bitcoin's protocol design as genuinely innovative. The industry expected an ally. It got an opponent — because understanding the technology never meant approving of how it was sold to retail investors.
Gensler's position stayed remarkably consistent across four years: the overwhelming majority of tokens sold to the public are securities under the Howey test, the 1946 Supreme Court standard, just wrapped in new technical packaging. If you sold people an asset by promising returns from a development team's efforts, it doesn't matter whether you call it a token, a coin, or an NFT — under the law it's a security, subject to disclosure rules that date back to the 1930s. Exchanges trading those tokens are required to register as securities exchanges. Almost none of them had.
Out of that position came the strategy the industry nicknamed "regulation by enforcement": rather than write clear new rules for a new technology, the Gensler-era SEC chose to file lawsuits and let courts draw the boundaries case by case. By various counts, the agency brought more than a hundred crypto-related enforcement actions during his tenure.
Three wars at once
The campaign peaked in June 2023, when the SEC sued the world's two largest crypto exchanges a day apart. On June 5 it sued Binance and its founder, Changpeng Zhao (CZ), alleging an unregistered exchange, commingled customer funds, and market manipulation. On June 6 it sued Coinbase, alleging it operated simultaneously as an unregistered exchange, broker, and clearing agency. Zhao later pleaded guilty in a separate Justice Department criminal case for violating U.S. anti-money-laundering law, stepped down as Binance's CEO, and was sentenced to roughly four months in prison — a rare instance of crypto regulatory pressure ending in real jail time for the founder of a global exchange.
A third front had opened earlier, against Ripple Labs, the issuer of the XRP token, filed back in December 2020 under the previous SEC chair — but it was under Gensler that the case reached trial. In July 2023, Judge Analisa Torres issued a ruling both sides claimed as a win: XRP sales to institutional buyers under direct contracts were indeed an unregistered securities offering, but programmatic sales on open exchanges were not, because buyers on the exchange had no idea they were buying from Ripple specifically. That split — the same asset can be a security in one sales context and not in another — became one of the era's most-cited precedents, and it also revealed how tangled the field itself was for the regulator trying to police it.
Terra's collapse and the price of belief
Not every fight was contested. In May 2022, the collapse of the algorithmic stablecoin TerraUSD and its companion token LUNA wiped out on the order of $40 billion in market value within days — one of the largest single crashes in crypto history. The SEC sued Terraform Labs and its founder, Do Kwon, for fraud in connection with unregistered securities sales. In April 2024, a jury found the company and Kwon liable; the resulting judgment ordered roughly $4.5 billion in penalties and disgorgement — though actually collecting that sum from a bankrupt entity was an entirely separate problem.
Our record. Terra is a textbook case of the Shadow Hathor: a system built on a loop of instant reward — a stablecoin yielding roughly 20% annually was itself a warning sign — that held together exactly as long as new money kept flowing in. No value production underneath, just a mechanism feeding on new believers. When the music stopped, the Scales of Ma'at weighed the promise against what actually sat in reserve, and the promise turned out to be air.
Regulation by court, not by law
The most common industry complaint about Gensler was never "you're persecuting us." It was "you won't tell us what's allowed — you just wait to sue." For years the SEC rejected spot Bitcoin ETF applications, citing market manipulation risk, without ever publishing a clear standard an applicant could actually meet. Grayscale challenged one such rejection in court, and in August 2023 the D.C. Circuit Court of Appeals sided with it, calling the SEC's denial "arbitrary and capricious" — unusually sharp language for a ruling against a federal regulator. Under pressure from that loss, the SEC approved eleven spot Bitcoin ETFs at once in January 2024; a few months later, in May 2024, spot Ethereum ETF filings were approved through the same process.
The result was a strange picture: the market got access to regulated products not because the regulator chose to grant it, but because a court forced its hand. That's the essence of regulation by enforcement — rules arrived after the fact, as a byproduct of the SEC's courtroom losses, rather than as the output of deliberate rulemaking.
What was left when Gensler left
Gensler stepped down in January 2025, alongside the change of presidential administration — the routine handover of power in Washington. His successor, Paul Atkins, signaled a far more industry-friendly posture from the start. Within 2025, the SEC began unwinding much of the Gensler-era docket: the Coinbase suit was dropped, the Kraken case was dismissed, and in the Ripple matter both sides withdrew their appeals, closing out a years-long fight with a compromise rather than a verdict. In under a year, the pendulum swung from one extreme to the other.
That speed of reversal is the era's real lesson. For four years the industry lived under the threat of lawsuits that were won, lost, or simply withdrawn — not because the underlying law changed, but because the face in the chairman's seat did. The Securities Act of 1933 and the Securities Exchange Act of 1934 remained, word for word, the same statutes the entire time.
Which leaves a practical conclusion that outlives any individual SEC chair: the legal status of the asset you're holding is not a constant. It depends on interpretation, and interpretation depends on people, and people change with every election cycle. Anyone building a system meant to last decades rather than one political term needs to design that instability into the foundation from the start — not be surprised by it later.