What it is
This approach involves regulators bringing legal actions against companies or individuals for alleged violations, thereby signaling their interpretation of existing laws and setting de facto guidelines for an industry. Instead of issuing clear rules or guidance upfront through public comment periods, the agency uses court cases, settlements, and consent decrees to define what is permissible or impermissible.
In the crypto space, the SEC is frequently accused of regulation by enforcement, particularly by industry participants and some lawmakers. Critics argue that by pursuing numerous enforcement actions against digital asset firms, often alleging unregistered securities offerings, the SEC avoids providing clear rules for an evolving sector, creating uncertainty and hindering innovation.
Why it matters
This approach creates regulatory uncertainty in crypto, making it harder for projects to comply and potentially impacting your investments.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice