Assessing the Legal and Market Risks of Blockchain Infrastructure Providers in Token-Launch Schemes

The DeFi ecosystem has emerged as a transformative force in global finance, but its rapid innovation has collided with a fragmented and evolving regulatory landscape. For blockchain infrastructure providers, the dual pressures of legal exposure and market volatility present significant challenges. This analysis examines the regulatory and market risks facing these providers, particularly in token-launch schemes, drawing on recent enforcement actions, legal precedents, and policy shifts.

Legal Risks: Regulatory Exposure and Liability Frameworks

The U.S. Securities and Exchange Commission (SEC) has been a central actor in shaping the legal boundaries of DeFi. In SEC v. Ripple Labs, Inc., the agency argued that programmatic XRP sales to retail investors constituted unregistered securities offerings under the Howey test, which defines an investment contract as one where money is invested in a common enterprise with profit expectations tied to the efforts of others according to Katten. While the district court ruled in 2023 that institutional XRP sales violated securities laws, it exempted programmatic sales on exchanges according to Katten. This nuanced outcome highlights the SEC's focus on distinguishing between primary and secondary market activities-a distinction that remains contested in ongoing litigation.

The SEC's recent no-action letters, however, signal a more pragmatic approach. For instance, a 2025 letter clarified that DePIN token distributions-where tokens are programmatically awarded to participants contributing resources like bandwidth or storage-do not satisfy the Howey test's fourth prong, as rewards depend on participants' own efforts rather than a central promoter according to Lw. This guidance provides clarity for infrastructure providers in decentralized physical infrastructure networks (DePINs), but it also underscores the agency's willingness to adapt to novel use cases.

Meanwhile, the Department of Justice (DOJ) has shifted its stance on liability for DeFi developers. In 2025, Acting Assistant Attorney General Matthew Galeotti stated that developers of decentralized platforms without criminal intent would not face charges under 18 U.S.C. § 1960 for unlicensed money transmission according to Fintech and Digital Assets. This policy aligns with the DOJ's conviction of Roman Storm, co-founder of Tornado Cash, who was found guilty of conspiring to operate an unlicensed money transmitting business but not for broader money laundering charges according to Fintech and Digital Assets. Such cases illustrate the DOJ's focus on criminal intent, distinguishing between neutral infrastructure and deliberate facilitation of illicit activity.

Market Risks: Regulatory Impact on Token Valuations and Systemic Stability

Regulatory developments in 2025 have profoundly influenced DeFi token valuations and systemic stability. The U.S. GENIUS Act and the EU's Markets in Crypto-Assets (MiCA) framework have introduced structured oversight for stablecoins, a critical component of DeFi infrastructure. The GENIUS Act mandates 1:1 reserve backing for USD-backed stablecoins, monthly public disclosures, and AML/KYC compliance, according to JAMSADR fostering institutional adoption and projected market penetration of 50% within six years. Similarly, MiCA's harmonized classification of tokens-electronic money tokens (EMTs), asset-referenced tokens (ARTs), and other crypto-assets-has reinforced investor protection while according to Two Birds complicating cross-border access for non-EU issuers.

However, regulatory divergence between the U.S. and EU models creates operational challenges. For example, functionally equivalent stablecoins may be classified differently depending on issuer jurisdiction, according to Two Birds forcing infrastructure providers to adopt jurisdiction-specific compliance strategies. This fragmentation exacerbates systemic risks, according to Elliptic as highlighted by the Financial Stability Board (FSB), which identified gaps in cross-border oversight and stablecoin regulation as threats to global financial stability.

The decline in DeFi activity in Europe further illustrates market risks. In Q1 2025, decentralized exchange (DEX) trading volumes dropped 18.9%, according to Relmin Insurance partly due to regulatory uncertainty and the EU's focus on operational resilience under the Digital Operational Resilience Act (DORA). These trends suggest that regulatory clarity is a double-edged sword: while it attracts institutional capital, it also narrows arbitrage opportunities and increases compliance costs for smaller players.

Recent Enforcement Actions: Case Studies in Liability

Recent enforcement actions underscore the evolving legal landscape for DeFi infrastructure providers. The SEC's settlement with Gemini Trust Company over its Gemini Earn lending program-alleged to offer unregistered securities-according to Gibson Dunn reflects a pattern of resolving disputes through negotiated settlements rather than protracted litigation. Similarly, the DOJ's deferred prosecution agreement with Roger Ver for federal tax charges and its forfeiture action involving 127,271 bitcoin according to Dynamis LLP highlight the agency's broad enforcement reach.

High-profile cases like United States v. Avraham Eisenberg (Mango Markets) further complicate liability assessments. Eisenberg's conviction for manipulating perpetual contracts was overturned in 2025 due to procedural issues, according to JDSupra illustrating the challenges of applying traditional criminal laws to algorithmic trading in decentralized systems. These cases collectively demonstrate that liability in DeFi is increasingly tied to intent, jurisdiction, and the specific design of protocols.

Conclusion: Navigating the Regulatory-Compliance Tightrope

For blockchain infrastructure providers, the path forward requires balancing innovation with compliance. The SEC's no-action letters and the DOJ's intent-focused policies offer some respite, but they also create ambiguity. Market participants must monitor regulatory developments in real time, particularly as global frameworks like MiCA and the GENIUS Act mature.

Investors should prioritize infrastructure providers that demonstrate adaptability to regulatory shifts, such as those integrating real-time compliance tools or aligning with institutional-grade standards. While the DeFi ecosystem remains resilient, the interplay of legal and market risks will likely define its trajectory in the coming years.