Regulators Target Selective Crypto Trading to Uphold Fair Disclosure Standards

The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are intensifying their scrutiny of unusual trading activity preceding major crypto-treasury announcements, according to a Wall Street Journal report. The regulators are investigating potential violations of Regulation Fair Disclosure (Reg FD), a rule requiring companies to disseminate material information broadly rather than selectively to certain investors. This focus follows reports of suspicious trading patterns occurring ahead of official market disclosures, raising concerns about possible insider trading or market manipulation.

FINRA, which oversees broker-dealer activities, has already reached out to several crypto treasury companies as part of its review. Such outreach often serves as a precursor to formal investigations, particularly if evidence of non-compliance with Reg FD is identified. The scrutiny highlights regulators’ growing attention to the intersection of traditional financial instruments and digital assets, especially as crypto treasuries—products designed to track the performance of cryptocurrency portfolios—gain traction among institutional and retail investors.

The investigation centers on whether firms or individuals exploited non-public information to execute trades before official announcements. For example, if a crypto treasury company disclosed a strategic partnership or product launch after a period of abnormal trading volume, regulators would seek to determine if the activity violated Reg FD. The WSJ noted that FINRA’s involvement underscores the regulatory body’s role in monitoring market integrity, particularly in fast-moving sectors like crypto where disclosure practices remain evolving.

The SEC has also signaled broader efforts to clarify the regulatory framework for crypto assets in its Spring 2025 regulatory agenda. While the agenda primarily focuses on rules for the offer, custody, and trading of crypto assets, it reflects the commission’s commitment to addressing gaps in oversight. This context suggests that the current scrutiny of trading ahead of crypto-treasury announcements may be part of a larger initiative to harmonize crypto market practices with existing securities laws.

Analysts emphasize that the outcome of these investigations could set precedents for how crypto firms disclose material information. For instance, if regulators find that a company failed to provide timely, non-discriminatory disclosures, it could face enforcement actions ranging from fines to restrictions on product offerings. Such actions would reinforce the importance of transparency in a market where information asymmetry remains a persistent risk.

The WSJ report also highlights the broader implications for market participants. Traders and investors must remain vigilant about the timing and nature of disclosures, particularly for products like crypto treasuries, which often rely on dynamic, real-time data. FINRA’s review may also prompt firms to enhance their internal compliance protocols, ensuring that all material information is disseminated through approved channels before any trading occurs.

As the crypto market continues to mature, regulatory clarity on disclosure and trading practices will be critical to fostering investor confidence. The SEC and FINRA’s actions demonstrate a proactive stance toward addressing risks in a sector where innovation often outpaces established rules. While the investigation is still in its early stages, its findings could shape how crypto treasuries and other digital asset products are structured and disclosed in the future.