SEC Faces Mounting Criticism as Coinbase and U.S. Lawmakers Challenge Its Crypto Policies
Last week was especially harsh for the United States Securities and Exchange Commission (SEC), as industry figures, lawmakers, and advocacy groups publicly criticized the regulator’s approach to crypto.
Industry Pushback on the SEC’s Proposed Custody Rule
May 8 marked the deadline for feedback on the SEC’s proposed custody rule — and responses were overwhelmingly negative. Andreessen Horowitz’s general counsel Miles Jennings described the proposal as a “misguided and transparent attempt to wage war on crypto.”
The Blockchain Association argued that the rule exceeds the SEC’s legal authority and would make it harder for advisers to transact with crypto exchanges, ultimately increasing risk for investors. Representative Patrick McHenry, chair of the House Financial Services Committee, also criticized the proposal, accusing the SEC of overstepping its jurisdiction.
Coinbase and the Chamber of Commerce Challenge the SEC
Coinbase remains at the center of the dispute after receiving a “legal threat” from the SEC in late March alleging possible securities law violations. The exchange has since filed a formal complaint, backed by a powerful amicus brief from the U.S. Chamber of Commerce.
The Chamber accused the SEC of “deliberately creating a precarious and uncertain landscape” for crypto firms, while crypto investment firm Paradigm — founded by Coinbase co-founder Fred Ehrsam — warned that such ambiguity could amount to a “de facto ban” on digital asset platforms without a clear path to registration.
Watchdog Group Files Suit Over Potential SEC Conflicts
Further controversy emerged as Empower Oversight Whistleblowers and Research (EMPOWR) filed a lawsuit against the SEC for failing to comply with a Freedom of Information Act request. The group seeks access to communications between former SEC officials and their previous or future employers, citing potential conflicts of interest.
The lawsuit names former SEC chair Jay Clayton, former enforcement director Marc Berger, and former corporate finance director William Hinman — all key figures during the agency’s early actions on crypto regulation.
Texas Moves to Protect the Right to Use Crypto
In contrast to federal uncertainty, Texas lawmakers voted to amend the state’s Bill of Rights to explicitly recognize the right of individuals to “possess, retain, and utilize digital currencies.”
House Joint Resolution 146, introduced by Representative Giovanni Capriglione, affirms that Texans have the freedom to use any mutually agreed medium of exchange — including cash, coin, bullion, or crypto — for trade and contracting, safeguarding citizens’ access to digital assets.
Do Kwon’s Bail Accepted by Montenegro Court
In Montenegro, a court officially accepted bail terms for Terra founder Do Kwon and Terraform Labs CFO Han Chang-Joon, both charged with document forgery.
Each will post €400,000 ($436,000) and remain under house arrest pending trial, scheduled to begin June 16. The court warned that violating house arrest conditions would forfeit the bail into a “special section” of its budget.
Sam Bankman-Fried Seeks Dismissal of Multiple Charges
Former FTX CEO Sam Bankman-Fried has asked a U.S. court to dismiss up to 10 criminal charges filed against him, months ahead of his October trial. His legal team argues that several charges violate the “rule of specialty” — a treaty clause limiting prosecution to crimes specified during extradition from the Bahamas.
Bankman-Fried faces allegations of fraud, money laundering, and conspiracy following the collapse of FTX. His lawyers have asked the court to drop all charges except three related to commodities, securities, and money-laundering conspiracies.
