SEC Leans on Proven Laws to Target Crypto Insider Trading

The U.S. Securities and Exchange Commission (SEC) has intensified its focus on insider trading in the cryptocurrency sector, signaling a strategic shift under Chairman Paul Atkins. According to recent enforcement guidance, the agency is prioritizing well-established legal frameworks over speculative or expansive interpretations of insider trading laws. This approach aligns with the SEC’s historical enforcement strategies, emphasizing cases that involve clear violations of fiduciary duties and material nonpublic information (MNPI). The agency’s enforcement director, Judge Ryan, has underscored a preference for “tried-and-true fact patterns,” indicating a deliberate move away from aggressive, untested theories that sparked controversy in past cases SEC Enforcement Outlook: Insider Trading Cases in 2025^[1].

The SEC’s enforcement actions are grounded in two primary legal theories: classical and misappropriation. Classical insider trading occurs when corporate insiders trade securities based on MNPI, breaching their duty to shareholders. Misappropriation theory applies to outsiders who trade on MNPI obtained from a source, such as a company employee or third party. Recent cases, including SEC v. Panuwat and SEC v. Peizer, illustrate the agency’s reliance on these principles. In Panuwat, a defendant was convicted for trading competitor stock after learning of a corporate acquisition, while Peizer involved the use of Rule 10b5-1 trading plans to execute sales while in possession of MNPI SEC Enforcement Outlook: Insider Trading Cases in 2025^[1]. These cases highlight the SEC’s focus on tangible evidence of misconduct, such as well-timed trades, aggressive options strategies, and significant profit avoidance.

The agency’s scrutiny extends to Rule 10b5-1 trading plans, which allow executives to automate trades under predetermined conditions. While these plans can serve as a defense against insider trading allegations, their misuse remains a priority. In Peizer, the SEC successfully argued that the defendant’s trades violated the rule by initiating the plan while aware of material risks. The case, which resulted in a criminal conviction in 2024, underscores the SEC’s commitment to preventing abuses of such mechanisms SEC Enforcement Outlook: Insider Trading Cases in 2025^[1]. Commissioners Hester Pierce and Mark Uyeda, both critical of the “shadow trading” theory used in past cases, have reinforced the agency’s current stance, ensuring alignment with the majority vote under Chairman Atkins.

The SEC’s strategy also reflects broader regulatory trends. Chairman Atkins has advocated for a more crypto-friendly approach, including the development of an “innovation exemption” to expedite product launches by year-end Crypto Regulation: Comparing U.S. and EU Trends in 2025^[3]. This shift, however, does not signal a relaxation of enforcement standards. Instead, the agency is balancing innovation incentives with investor protection, as evidenced by its targeted focus on crypto-related insider trading. The SEC’s recent guidance on disclosure requirements for crypto securities further supports this duality, providing clarity for market participants while maintaining rigorous compliance expectations .

Analysts note that the SEC’s approach diverges from the EU’s Markets in Crypto-Assets (MiCA) framework, which emphasizes preemptive regulation over reactive enforcement . While the U.S. model relies on case-by-case adjudication, the EU’s standardized rules aim to reduce regulatory uncertainty. Despite these differences, both jurisdictions share a common goal: safeguarding market integrity. The SEC’s current focus on crypto insider trading aligns with global efforts to address risks in decentralized markets, where anonymity and cross-border transactions complicate oversight .

The agency’s upcoming fiscal year will be critical in determining the trajectory of its enforcement priorities. With a backlog of cases and evolving market dynamics, the SEC’s adherence to established legal frameworks could influence the broader regulatory landscape. As noted by enforcement staff, the agency will monitor outcomes to assess whether its current strategy remains effective or if new challenges necessitate adjustments. For now, the emphasis on classical and misappropriation theories—coupled with a cautious stance on novel legal interpretations—positions the SEC to address crypto insider trading with both precision and predictability SEC Enforcement Outlook: Insider Trading Cases in 2025^[1].