What is the SEC? Understanding this article will save you ten years of detours in the crypto market!

In the world of Crypto Assets, no regulatory body has been able to elicit as much anticipation and anxiety as the SEC. In July 2023, when the SEC accused Gate of selling unregistered securities, the entire industry held its breath.

In April 2025, when the SEC officially withdrew its case against Gate, the market once again witnessed the outcome of the complex game between regulation and crypto projects.

So, what exactly is the SEC? How does it have such a huge impact on the global Crypto Assets market? This article will take you deep into understanding this powerful regulatory agency and explore how it shapes the future landscape of the encryption industry.

01 What is the SEC? Unveiling the Veil of the American Financial Regulatory Dominance

The SEC, officially known as the U.S. Securities and Exchange Commission, was established in 1934 and is an independent agency of the U.S. federal government. It is a direct product of the stock market crash of 1929 and the Great Depression, tasked with the mission of restoring investor confidence in the financial markets.

The core responsibilities of the SEC can be summarized as "three-pronged": protecting investors, maintaining a fair and orderly market environment, and promoting capital formation. It achieves these goals by enforcing securities laws, ensuring that publicly listed companies provide important and accurate information to the public, and regulating all participants in the securities industry.

In the field of Crypto Assets, the SEC's key assertion is to determine whether a specific Crypto Asset qualifies as a security. If it does, it must comply with the same registration and disclosure requirements as traditional securities.

The current chairman of the SEC, Gary Gensler, has repeatedly stated that he believes most Crypto Assets meet the definition of securities and should be subject to regulation.

02 SEC and Crypto Assets: The Complex Game of Regulation and Innovation

The relationship between the SEC and Crypto Assets has always been delicate and complex. On one hand, the SEC recognizes the innovative potential of blockchain technology and encryption; on the other hand, it insists on the need to protect investors from fraud and market manipulation.

The main basis for SEC regulation of Crypto Assets comes from the "Howey Test," which is a standard established by the U.S. Supreme Court in 1946 to determine whether a specific transaction constitutes an "investment contract." According to this test, if an investment meets the following four conditions, it is considered a security:

1. It is capital investment;
2. Existing in a joint venture;
3. Expect to make a profit;
4. Profits come from the efforts of others or initiators.

In the case of Gate, the SEC initially charged it with selling unregistered securities, claiming that it raised over $100 million from investors through three Crypto Assets projects. The regulator specifically pointed out that one of Gate's coins was promoted as a high-yield "blockchain certificate of deposit," with its staking function promising a maximum return rate of up to 38%.

However, the United States District Court for the Eastern District of New York dismissed the SEC's original complaint on February 28, 2025, although it allowed the SEC to submit a revised version by March 20. After a series of delays, the SEC ultimately chose to withdraw the case entirely and would not submit a revised complaint.

03 The Impact of SEC Regulation on the Crypto Assets Market

Each decision made by the SEC triggers a chain reaction in the Crypto Assets market. After the SEC dropped the case against Gate, the platform's main coin showed a significant price rebound.

According to market data, the price of the token has increased by 14% in the past 24 hours and by 50% in the past week.

Despite a lengthy legal process, the current trading price of the token is about 0.2% of its all-time high, but the recent legal resolution provides a good sign for its recovery.

The SEC's regulatory stance directly affects the sentiment of the entire Crypto Assets market. When the SEC takes action against a project, it often triggers market panic; whereas when it clarifies its position or drops a lawsuit, it may boost market confidence.

From the Gate case, we can see the importance of legal clarity for encryption projects. The founder of Gate emphasized that this outcome brought clarity to regulation, placing Gate's projects in a unique advantageous position in the Crypto Assets field.

04 How do encryption projects respond to SEC regulation?

Facing regulatory pressure from the SEC, crypto assets projects can adopt various strategies to ensure compliance:

First, conduct a thorough legal analysis to assess whether the tokens may be deemed as securities. This involves carefully analyzing the economic structure, marketing methods, and functions of the tokens.

Secondly, maintain transparency and full disclosure. Even if you choose not to sign up with the SEC, you should clearly communicate the relevant risks and regulatory status to potential investors.

In addition, actively participate in regulatory dialogues. An increasing number of crypto projects are beginning to proactively communicate with the SEC, seeking legal clarity and even striving for no-action letters or other guidance.

In the case of Gate, its founder emphasized that "this is the only case where the SEC has lost in every lawsuit, and the Crypto Assets have won comprehensively; the court dismissed all charges brought by the SEC." This legal challenge is also a way for projects to respond to SEC regulation.

05 How should investors view the SEC's actions?

For Crypto Assets investors, it is crucial to understand the SEC's actions and positions. Here are some key recommendations:

• Pay attention to the official statements and actions of the SEC: this information often indicates regulatory trends and can help investors anticipate market fluctuations.
• Assess the project's compliance attitude: Focus on those projects that actively seek compliance rather than evade regulation.
• Diversified Investment: Regulatory uncertainty still exists, and diversifying investments helps reduce the risk of specific projects being affected by regulation.
• Understanding the role of regulatory protection: Although SEC interventions often lead to short-term market fluctuations, in the long run, a clear regulatory framework is beneficial for the healthy development of the industry.

After the SEC withdrew the case against Gate, the coin showed signs of recovery, but investors should always conduct thorough research and consider the inherent risks associated with investing in crypto assets.

Future Outlook

As the Crypto Assets sector continues to gain mainstream attention, the SEC's role will become even more critical. It not only shapes the regulatory environment but also sets a precedent for regulatory agencies in other global markets. For Gate and other encryption projects, navigating this ever-changing regulatory landscape remains a top priority.

In the case of Gate, its founder pointed out that "in this case, the SEC is actually suing the software code itself," which adds an intriguing dimension to the way regulators treat Crypto Assets projects.

In the coming years, how the SEC balances innovation and investor protection will determine the trajectory of the next phase of Crypto Assets development.