Caroline Crenshaw, the last remaining Democrat in the U.S. Securities and Exchange Commission (SEC), has criticized the agency’s approach to crypto regulation, likening it to “a game of regulatory Jenga.”
Based on her argument, the regulator’s reversal of crypto policy has damaged the agency’s credibility.
During the SEC Speaks event on May 19, Commissioner Caroline Crenshaw cautioned about what she described as a “ dangerous dismantling of discrete but interconnected rules” on crypto and the broader market.
Crenshaw said the agency is quietly unwinding essential rules that had helped keep financial markets stable for generations. She compared market stability to a Jenga tower rather than a solid building, warning that removing just a few blocks could cause the entire structure to collapse.
Crenshaw criticized the SEC’s emerging pattern of non-enforcement, arguing that when laws and rules are not upheld, they can easily be ignored or bypassed—particularly in cases involving crypto firms, even if she did not mention them directly.
The commissioner said the agency is effectively signaling to the market that some laws no longer apply, describing this informal, indirect approach to policymaking as dangerous and reckless.
Crenshaw argued that recent rulings to abandon enforcement actions against some of the largest crypto companies, Coinbase, Kraken, and MetaMask, indicate that the agency is abdicating its role as a market watchdog. She cautioned that these retreats could have long-term implications for the crypto sector and the financial system as a whole.
SEC leadership pushes to scale back crypto crackdowns
The SEC’s latest move underscores broader internal shifts since the Trump administration took charge earlier this year. SEC Commissioner Mark Uyeda and Hester Peirce, who leads the SEC’s new Crypto Task Force, are on the record for wanting to see a pullback on the overregulation of digital assets.
Cryptocurrency innovation, they say, has been locked in “SEC limbo” for way too long. Peirce also maintained that most digital assets are not securities and do not belong in the SEC’s jurisdiction.
She said many of those tokens may have qualified as securities when issued, but they’d since “operationalized” or become functional assets, doing little or no securities business anymore.
Uyeda echoed her views, stating that the SEC should focus on providing regulatory clarity instead of creating uncertainty through aggressive enforcement. He emphasized that the agency should no longer use its enforcement division as a tool for policymaking, adding that such an approach was no longer appropriate.
The Commission has already settled or put several cases involving crypto on hold. That includes actions against Robinhood’s crypto arm, Uniswap Labs, and other DeFi platforms. The mood inside the agency is downbeat, according to staff members who are familiar with it. Several enforcement lawyers have resigned in recent months.
Crenshaw warns SEC against pulling back enforcement
Crenshaw cautioned that the pullback in enforcement isn’t happening in a vacuum. Cryptocurrency markets are becoming more interconnected with traditional finance. Financial institutions such as JPMorgan and BlackRock are developing products with a crypto tilt. Simultaneously, meme coins and unregulated digital tokens are surging onto the market.
Crenshaw warned that the risks seen during the FTX collapse persist, even if they no longer receive the same level of attention.
Crenshaw also questioned the SEC’s joint staff and enforcement guidance, suggesting that meme coins and certain NFTs are not securities. She criticized this approach as regulatory drift rather than genuine legal clarity, warning that the agency cannot afford to dismiss the real investor protection risks these assets may pose.
Crenshaw’s message was clear: pulling back on enforcement without a solid regulatory framework puts markets and investors at significant risk. She urged the Commission to rethink its current approach before causing irreversible harm.
