There’s a high number of crypto firms on outgoing SEC Chair Gary Gensler’s naughty list that are likely to get some relief once Paul Atkins takes over under the Trump administration. These companies received Wells' notice of allegations of illegal security in the first quarter of the fiscal year.
While the staff at the US SEC is buzzing with this news, the crypto market is going through a crash ahead of the possible bull cycle in 2025. The outgoing SEC Chair, Gary Gensler, had a busy year as he campaigned hard to rein in the crypto industry. This culminated in Wells notices served to many crypto firms who were told that the agency had made the preliminary determination to take legal action against them.
But before we get into the prospect of the crypto firms served with Wells Notice this year, let’s take a look at what it means.
What does a Wells Notice mean?
Getting a Wells Notice doesn’t necessarily mean that the SEC is suing the company. Crypto firms can rebut the regulator’s claims, and in certain cases, the SEC lets things go. Yet it is a serious sign of enforcement from the regulator, as it indicates that it has gone through the activities of the business.
Now that Donald Trump-backed pro-crypto lawyer Paul Atkins is taking over the office, here are crypto firms that might get relief from enforcement threats.
Crypto Firms That Got Wells Notice In 2024
In a year marked by heightened regulatory scrutiny, several prominent crypto firms received Wells Notices from the Securities and Exchange Commission (SEC), signalling potential enforcement actions. Here's a comprehensive look at the major developments in this regulatory crackdown.
Uniswap Labs Challenges SEC's Stance
Uniswap Labs, developer of one of DeFi's largest decentralized exchanges, received a Wells Notice in April. CEO Hayden Adams expressed his readiness to fight the SEC's position, which argues that Uniswap operates as an unregistered securities exchange. The protocol, having processed nearly $1.6 trillion in trading volumes since 2018, could face the SEC's first major enforcement action against a DeFi platform.
Consensys and MetaMask Under Fire
Following Uniswap, Consensys, the developer behind MetaMask wallet, received a Wells Notice and took an aggressive approach by suing the SEC for regulatory clarity regarding Ethereum. While the SEC later dropped its Ethereum investigation, it filed a lawsuit against Consensys in July, alleging MetaMask operated as an unregistered securities broker. A Texas judge later dismissed Consensys' countersuit.
Robinhood's Crypto Division Targeted
May saw Robinhood's crypto division receive a Wells Notice, though the company maintained that its listed assets are not securities. Chief Legal Officer Dan Gallagher defended the company's position, but the exact nature of the SEC's concerns remained unclear. Despite previous regulatory encounters, the SEC has not yet filed a new lawsuit against Robinhood.
OpenSea Enters Uncharted Territory
The NFT marketplace OpenSea disclosed its Wells Notice in late August, marking potential new territory for SEC enforcement. If pursued, this would represent the SEC's first action against an NFT marketplace, expanding the scope of crypto regulation into the NFT space.
Crypto.com's Legal Counter-offensive
In October, Crypto.com received a Wells Notice and responded by filing a lawsuit against the SEC, seeking clarity on whether six cryptocurrencies, including Solana, Cardano, and Algorand, qualify as securities. However, their legal challenge was dismissed in December, and the SEC has yet to file its own suit.
Wave of New Wells Notices
The year's end saw additional firms joining the "Wells Notice club," including Immutable Labs, CyberKongz, and Unicoin. This trend led Coinbase CEO Brian Armstrong to humorously declare he was "long Wells notice companies," referencing his own company's experience with SEC enforcement.
Industry observers note that more companies may have received notices privately, as disclosure is not mandatory for non-public entities. The crypto industry's response to these notices has varied from direct legal challenges to public statements defending their positions, highlighting the ongoing tension between innovation and regulation in the cryptocurrency space.