Crypto isn’t exactly aboveboard, and many swindles have plagued the industry. Nonetheless, governments seem reluctant to shut it down completely. Instead, they’ve introduced regulations under their anti-money laundering and countering the financing of terrorism laws. Some countries have even banned it outright, such as China and Saudi Arabia. Others have strict rules for its use, such as Japan, which requires anyone buying coins to register with the government and disclose their identity.

The United States is still figuring out how to regulate cryptocurrencies at the federal level. However, some state securities regulators have become more active in 2021. For example, New Jersey and several other states issued cease-and-desist orders against BlockFi, a cryptocurrency exchange that offered interest-bearing accounts. These orders argue that the company failed to meet registration requirements and deprived investors of critical information and disclosures.

Meanwhile, the Securities and Exchange Commission (SEC) has slapped two of the biggest crypto enterprises with back-to-back lawsuits. In one, the SEC accuses Coinbase of illegally operating as a securities exchange without a license in the United States. The SEC’s other complaint alleges that Binance is selling unregistered securities.

These lawsuits could chill the nascent ecosystem of digital assets in the United States, which could hurt investment and development. If the SEC wins its lawsuits against the two companies, it would require them to take steps to comply with securities law, such as requiring public audits and disclosing conflicts of interest. It also requires them to reimburse customers who lose money due to hacks or other events.

The SEC’s double whammy may also signal that the agency is ready to take more aggressive action against other crypto firms that it views as violating securities law. In fact, the SEC’s outspoken chief of enforcement, Gary Gensler, has suggested that crypto-related products and services should be subject to the same regulations as traditional securities offerings.

But the SEC’s sweeping actions against the two big players might have more to do with politics than anything else. The agency’s senior officials, including Gensler, are known as skeptics of crypto. They believe that the industry will move overseas if the United States doesn’t act quickly to establish clearer regulatory guidelines.