/>iThe legal landscape surrounding blockchain technology underwent dramatic shifts in 2024, particularly in the United States, offering both remarkable opportunities and substantial compliance challenges. Governments introduced sweeping regulations, enforcement actions intensified and pivotal court rulings sent ripples across the crypto ecosystem. Throughout the year, the Polsinelli Blockchain+ team tracked these developments in our Bi-Weekly BitBlog updates.
As we enter 2025, we take a moment to recognize the milestones that significantly influenced the industry. The following review highlights the Top 10 Web3/Blockchain Legal Developments of 2024, each selected for its substantial impact on market participants, regulatory frameworks and the broader evolution of decentralized finance in the U.S. and beyond.
1. SEC Targets Major U.S. Crypto Exchanges in Unprecedented Legal Actions
Background: The SEC’s ongoing lawsuits against three of the largest digital asset exchanges in the United States—Coinbase, Binance, and Kraken—were arguably the most disruptive regulatory actions of 2024. This marked a significant and contentious shift in the SEC’s enforcement strategy, which had previously focused on issuers or promoters of digital assets. The SEC alleged, among other things, that the exchanges acted as unregistered broker-dealers of investment contracts, purportedly represented by the digital assets sold on their platforms, raising serious questions about the agency’s regulatory reach and its approach to defining what constitutes a “security” in the digital asset space. Further compounding the disruptive nature and possibly intent of these actions, the SEC chose not to name the issuers of the assets alleged to be “crypto asset securities,” except in the case of Binance, where the exchange’s native token BNB was explicitly cited. The complaint against Coinbase went even further, claiming that its self-custody wallet software facilitated unregistered broker-dealer transactions by integrating with decentralized finance (“DeFi”) platforms, which claim Coinbase successfully had dismissed. Additionally, the lawsuit asserted that Coinbase’s staking-as-a-service offerings constituted unregistered securities products, highlighting the SEC’s expansive view of its enforcement mandate.
Ongoing Effects: Currently, the lawsuits against Kraken and Coinbase have proceeded to discovery, while the case against Binance awaits a ruling on the SEC’s Amended Complaint after portions of the original complaint were dismissed by the court. These lawsuits are seen as “bet the company” cases, as a ruling in favor of the SEC could force the exchanges to delist all assets with unclear legal status—which could leave only a handful, such as ETH and BTC, as tradeable on those platforms.
The stakes are enormous, as these exchanges serve as the primary on-ramps between fiat currency and digital assets in the United States, particularly in light of the purported debanking of the industry described below. Any ruling, whether for or against these exchanges, will have profound and far-reaching implications for the digital asset economy, influencing the viability of current market participants and shaping the regulatory landscape for years to come. However, with a new administration and changes in SEC leadership expected in 2025, there is a possibility these cases could see a shift in direction. A more industry-friendly approach from regulators could lead to settlements or changes in enforcement priorities.
2.Ripple Ruling Finalized with Appeal Pending
Background: In 2023, the long battle between the SEC and Ripple reached a partial resolution with the Court ruling the digital asset at issue (“XRP”) is not itself a security and certain sales of the asset are not securities transactions. Nonetheless, it found that certain sales of XRP and related contractual arrangements could still qualify as securities transactions. In 2024, Ripple Labs was assessed a $125,035,150 civil penalty for illegal sales of securities in the form of XRP tokens and other contractual arrangements (a total of 1,278 transactions) with institutional investors—far less than the $2 billion the SEC initially sought. Both parties have appealed different aspects of the ruling, ensuring the dispute will continue into the new year.
Ongoing Effects: Although it may seem counterintuitive to call a nine-figure penalty a “win,” the outcome was ultimately favorable for Ripple—and, by extension, the broader digital asset industry. Notably, this marks the first time the SEC has pursued litigation to a final judgment against a digital asset issuer without shutting down the development team. While appeals are still underway, Ripple—despite having been one of the more aggressive projects with its initial coin offering (“ICO”) and maintaining a relatively centralized validator set—emerged with a result that suggests broader positive implications for the industry.
The ruling also appears to have caused the SEC to move away from its prior stance that tokens themselves are “crypto asset securities” and towards the more broadly accepted view that digital assets can be involved in securities transactions but, without something more, are not themselves securities. If the case continues to be pursued by the new administration, it is poised to become the first case on the regulatory status of digital assets to reach a federal Court of Appeals, potentially also creating binding authority on other Second Circuit courts.
3. Securities Status of Non-Fungible Tokens Under Continued Scrutiny
Background: The debate continued over whether sales of non-fungible tokens (“NFTs”) are sold as securities investment contracts or as consumer goods/collectibles. Class-action lawsuits against DraftKings and Dapper Labs were settled after plaintiffs survived motions to dismiss regarding the NFTs they issued, highlighting the legal complexities surrounding these digital assets. Meanwhile, the SEC brought an action against the Gary Vaynerchuk-backed project (Flyfish Club), which tied private dinner club access with NFT ownership, and reportedly issued a Wells notice against NFT marketplace OpenSea. In response, two prominent artists sued the SEC seeking declaratory relief on the grounds that the agency would later allege their planned NFT projects to be unregistered securities offerings.
Ongoing Effects: In a world where coveted event tickets and sneakers are often snatched up by automated bots, NFTs provide a method for creators and brands to ensure cryptographically verified supporters receive priority access to future products, services, or loyalty rewards. However, the uncertain legal classification of these digital assets continues to deter major brands from venturing too far into the NFT space, as they risk lawsuits or regulatory scrutiny for using them to connect with their audiences. Some brands even publicly shut down their NFT programs.
Compounding this uncertainty are ongoing intellectual property issues tied to NFTs. Polsinelli, representing the Digital Chamber, addressed these concerns earlier in 2024 in the Hermès v. Rothschild case, underscoring that until IP and securities questions are resolved, the full potential of the NFT ecosystem remains constrained by legal risk.
4. Banking Regulators Under Scrutiny for “Debanking” Digital Asset Participants
Background: The federal banking regulators’ perceived effort to pressure banks not to provide services to those in the digital assets industry has been commonly referred to as “Operation Choke Point 2.0.”. While this was most apparent in 2023, in the wake of the collapse of several banks that were active in the crypto space, the theory gained significant traction after a former Silvergate Bank executive publicly declared that supervisory pressure from the Federal Reserve and the Department of Financial Protection and Innovation had been so intense that Silvergate Bank “would have needed to remake its business model away from its focus on crypto-asset businesses,” ultimately compelling the bank to voluntarily wind down. Meanwhile, Coinbase made Freedom of Information Act ("FOIA") requests from a number of regulators, culminating in a court order for the FDIC to release the “pause letters” it had sent to member banks. While over-redacted to the point that the FDIC was ordered to re-release letters with more thoughtful redactions, the released letters proved that the FDIC indeed was calling for banks to “pause” banking the crypto industry.
Ongoing Effects: This phenomenon received its nickname because it was based on the original Operation Choke Point, in which the FDIC strongly urged banks to not provide services to the payday loan industry and other “high-risk” industries that were viewed with suspicion by regulators but were completely legal. In addition to drawing attention from politicians, executive, major publications and even The Joe Rogan Experience podcast, a recent Wall Street Journal article further highlighted the trend: among 160 crypto hedge funds surveyed, 75% reported difficulties accessing basic banking services over the past three years, compared to none of the 20 alternative investors (such as those in real estate or private credit) surveyed in the same period. Meanwhile, blowback from these alleged practices reverberated all the way to the 2024 presidential election, with several candidates openly criticizing federal regulators for stifling digital asset innovation and pledging to ensure fair access to banking for the crypto industry.
5. M&A Activity Closes Out Strong
Background: One sign of a market’s move towards maturity is whether there is significant consolidation and other M&A activity in that industry. The first real flurry of crypto-related mergers and acquisitions activity started in 2024 and appears to be well poised to continue into 2025. Some of the bigger deals include the tie-up between Coinshare and Valkyrie Funds, the $ASI merger resulting from Fetch.ai, Ocean Protocol and Singularitynet, the acquisition of Bridge by Stripe, Robinhood’s proposed acquisition of Bitstamp, Crypto.com’s acquisition of Fintek Securities, and Arca’s proposed acquisition of BlockTower. Polsinelli also got in on the action, advising on the sale of Brassica Technologies to BitGo as well as the sale of Landvault to Infinite Reality.
Ongoing Effects: One characteristic a lot of this activity had in common was the consolidation of the traditional finance (“TradFi”) world with the centralized finance (“CeFi”) and decentralized finance (“DeFi”) worlds. This worked in both directions, with some huge financial services companies acquiring blockchain-related platforms to help round out their offerings and some crypto-native companies acquiring licensed entities to give them more ability to access traditional markets. This also underscores the growing popularity of the tokenization of real-world assets, which many firms may be able to better accomplish by either acquiring those with the technology and licenses to do so or by licensing from third parties, rather than trying to develop themselves. In addition to M&A activity, a number of companies in the crypto ecosystem have either gone public or have announced that they are considering going public, including Exodus, Coincheck, Circle, Telegram, and Kraken. Besides providing early corporate investors with liquidity, this also gives the companies that have gone public another form of currency—their public company stock—to acquire platforms that help fill in their gaps.
6. Major U.S. Crypto Bankruptcies Enter Final Stages
Background: The collapse and alleged fraudulent practices at several major crypto lenders and exchanges—including Celsius Network, Voyager Digital, BlockFi, and the high-profile FTX—sparked widespread fears that the entire cryptocurrency market might implode. Regulators and the public alike braced for what many believed could be the industry’s downfall. However, the swift rebound in crypto prices and public sentiment proved otherwise, underscoring both the resilience of blockchain technology and a strong market demand for DeFi solutions. Because U.S. law offered no specific safeguards for crypto assets, these bankruptcies were handled under standard Chapter 11 proceedings in U.S. Bankruptcy Court. By 2024, most of the cases had advanced significantly toward resolutions for both creditors and depositors, even though estimated liabilities ranged into the billions of dollars across all impacted firms.
Ongoing Effects: In the wake of these bankruptcies, courts generally ruled that collateral posted for loans and any deposits in interest-bearing accounts became part of the debtors’ estates—allowing the debtors to reap the benefits of rising crypto prices. While this bolstered potential creditor recoveries, many depositors felt shortchanged because their claims were calculated based on the price of tokens at the time of the bankruptcy filing, meaning they did not share in any subsequent gains. Still, this arrangement enabled more robust payouts, sometimes nearing full recovery, despite the high costs of Chapter 11 proceedings. Had crypto prices not rebounded, many depositors would likely have seen little to no return on their assets. Although a significant number of claimants have received distributions covering most or even all of their claims, individuals who withdrew funds within 90 days of a bankruptcy filing still face “clawback” lawsuits intended to redistribute withdrawn assets more equitably among creditors. These lawsuits are expected to continue through 2025.
7. Protocol Developers Win Some and Lose Some
Background: Two significant decisions appeared to affirm that software developers should not be liable for the code that they create, even if third parties might later misuse it for illegal purposes. Notably, the Fifth Circuit tossed sanctions imposed by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”) on Tornado Cash, a privacy-preserving protocol, holding that OFAC overstepped its authority because smart contracts are not ‘property’ that can be owned and thus cannot be sanctioned. Similarly, Coinbase successfully moved to dismiss SEC claims regarding unregistered securities transactions within its self-custody wallet’s crypto-swapping functionality. On the other hand, sanctions against several individual developers of the Tornado Cash protocol and Samourai Wallet continue to be in effect, with the Department of Justice still pursuing criminal charges.
Ongoing Effects: These recent legal victories are part of a larger, ongoing discussion surrounding privacy and cybersecurity within the crypto ecosystem. By adopting the principle that developing neutral software does not inherently constitute complicity in potential misuse, these courts are helping uphold the crypto ethos of decentralization and autonomy. This mirrors earlier legal battles from the 1990s and early 2000s, such as Bernstein v. U.S. Dept. of Justice, which established the “Code is Speech” doctrine. This was also an extension of the dismissal of the 2023 class action against Uniswap Labs because the plaintiffs, attempting to sue Uniswap Labs for its work with the Uniswap protocol, failed to state a claim on which relief could be granted. It seems some courts are starting to recognize the difference between the user interface (“UI”) layer (which often is owned and controlled by an entity) and the underlying smart contracts that comprise the protocol itself (which may not be owned by anyone). On the other hand, due to the public and immutable nature of blockchain-enabled transactions, the extent of privacy that individuals can maintain will remain a critical area of focus for both developers and the governments seeking to regulate them.
8. Judicial Scrutiny Over DAO Structures
Background: The surge in funds flowing through products and services at least partially controlled by decentralized autonomous organizations (“DAOs”) has led to a corresponding increase in litigation targeting DAOs. For several years, courts have wrestled with many DAO-specific legal issues, including how they can be served process, determining which participants are potentially liable, and whether the DAOs can form legal structures after the fact to defend lawsuits and preserve attorney-client privilege. In one case, plaintiffs in a class action lawsuit against the DeFi lending protocol Compound attempted to serve the DAO through its governance forum. In Samuels v. Lido DAO, the court denied the investors' motions to dismiss, ruling that Lido DAO could plausibly be considered a general partnership under California law. This decision followed a vote by Lido DAO’s token holders to establish the legal entity Dolphin CL, LLC, specifically to hire legal counsel and represent the DAO’s interests in the litigation. The Commodities Futures Trading Commission (“CFTC”) also brought or settled claims against several purported DAOs.
Ongoing Effects: While some of the issues relating to DAOs are completely novel, others relate to areas where the law became relatively settled before the existence of non-corporate forms that limit liability, such as limited partnerships and limited liability companies. While there may be circumstances where a DAO is appropriate, the growing consensus is that there should be a formal legal structure with respect to business activities that are DAO-adjacent. In some instances, the DAO itself may also be ‘wrapped’ into a legal structure. Under the right circumstances, that could be facilitated via the newly-adopted Wyoming decentralized unincorporated nonprofit association(“DUNA”). Judges often appear inclined to view DAOs as mechanisms for avoiding liability, rather than tools for addressing issues like opaque governance or risks of centralization. While some DAOs or their functionalities may seek to limit interaction with the legal system through creative technical structuring, the trend is for DAOs to be just one part of the ecosystem surrounding a protocol.
9. Congress Grapples with Crypto Legislation Amid Regulatory Uncertainty
Background: While no laws were ultimately enacted, 2024 saw Congress take significant steps towards attempting to provide legislative clarity and guardrails regarding the crypto industry. Most notably, both the House and Senate passed a bipartisan resolution to overturn the controversial SEC Staff Accounting Bulletin 121. Although the resolution was vetoed by President Biden, it represented a rare moment of bipartisan agreement in a highly partisan time, signaling support for the crypto industry and perhaps sending a clear message to the SEC. Other legislative efforts that fell short of becoming law included the proposed Financial Innovation and Technology for the 21st Century Act("FIT 21")—a comprehensive crypto regulatory bill—passed the House with a decisive 279-136 majority but stalled in the Senate, as well as a stablecoin billthat passed through the House Financial Services Committee.
Ongoing Effects: The groundwork laid by Congress in 2024 presents a significant opportunity for the next session, with a new Congress expected to be more favorable to the digital asset industry. Both chambers are likely to prioritize crypto-friendly legislation, and an incoming administration that has signaled support for several of these bills could further accelerate progress. This shift creates an environment where long-awaited regulatory clarity may finally become a reality, allowing the U.S. to solidify its leadership in blockchain and digital asset innovation. This contrasts with the European Union, where the Markets in Crypto-Assets Regulation (“MiCA”) has started taking effect. MiCA establishes a much more comprehensive framework for digital asset oversight. While the legislation is already showing some flaws (particularly in its implementation with respect to stablecoins), MiCA shows that a legislative framework is achievable. In a global economy, one thing that could be important is ensuring U.S. legislation does not conflict with MiCA in a way that prevents the ability to do business in both places, which is a problem that has arisen before, particularly when GDPR was adopted by the EU.
10. Crypto’s Bi-Partisan Lobbying Efforts Pay Dividends
Background: Throughout 2024, major crypto exchanges, blockchain advocacy groups, investors, and trade associations—including the Blockchain Association and the Digital Chamber—significantly ramped up their lobbying efforts in Washington. Their primary focus was on the House Financial Services Committee and the Senate Banking Committee, where they pushed for balanced regulatory frameworks addressing stablecoins, DeFi, and clearer jurisdictional boundaries between the SEC and the CFTC. These efforts, combined with seemingly hostile actions by the current government against the crypto industry, helped turn crypto into a wedge issue, albeit one that doesn’t follow party lines.
In an election year, the largest crypto political action committee, Fairshake PAC, raised nearly a quarter billion dollars to support pro-crypto candidates on both sides of the aisle and to run campaigns against anti-crypto candidates, possibly being a contributing factor to losses by anti-crypto stalwarts like Sherrod Brown and Jamaal Bowman. Politicians listened, with Donald Trump declaring (among other things) that all bitcoin will be “made in the USA” and Kamala Harris forming a pro-crypto affinity group. Pro-crypto groups likely also played a hand in the selection of certain potential members of the next administration and chairs of Congressional committees, such as the proposed nomination of Paul Atkins as the next Chair of the SEC and pro-crypto Representative French Hill being the next Chairman of the House Financial Services Committee.
Ongoing Effects: The future is looking bright, due in no small part to these intense lobbying efforts in 2024. Crypto legislation seems to be one of the few areas with bipartisan support, so there could be meaningful progress on issues such as stablecoins, taxonomy, AML/KYC, and clarity on the treatment of digital assets. These combined efforts could also help unify the patchwork of state-level regulations, potentially positioning the U.S. for a more coherent and globally competitive stance on digital assets. A significant shift in crypto philosophy is also expected in the administration and at the regulatory level.
Conclusion
The days when the federal government is actively hostile to crypto are likely to be numbered, but how this plays out is open to significant speculation. Will Congress bring regulatory clarity? Will the SEC drop some of its existing enforcement actions and take a more laissez-faire approach to policing the industry? Will we get last-minute surprises from the current administration, such as the final crypto DeFi broker rules issued by the Department of Treasury, dropped on Christmas Eve, or events such as the Ripple lawsuit, filed while Jay Clayton was a lame duck as Chairman of the SEC? The year 2025 brings with it cautious optimism, but companies in the blockchain space should prepare now for potential changes, and there may be significant opportunity for traditional finance services companies to enter the digital assets space.
