The U.S. Securities and Exchange Commission (SEC) voluntarily dismissed its civil lawsuit against Binance, the world’s largest cryptocurrency exchange, on May 29, 2025, marking a shift in regulatory approach.
The SEC reportedly clarified that certain staking activities on proof-of-stake networks do not constitute securities transactions, reducing uncertainty for projects like Ethereum and Solana.
These moves signal a potential thaw in the SEC’s stance on decentralized finance (DeFi), a sector with a global market value exceeding $100 billion in 2025.
In a significant week for the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) has taken two notable steps that could reshape the landscape of decentralized finance (DeFi). On May 29, 2025, the SEC dismissed its civil lawsuit against Binance, ending a high-profile case that began in June 2023. Reports also suggest the agency clarified that certain staking activities on proof-of-stake networks do not fall under securities laws, offering relief to blockchain projects and investors. These developments hint at a more collaborative regulatory approach, a shift from the enforcement-heavy stance of prior years, and could bolster the fast-growing DeFi sector.
SEC Drops Binance Lawsuit
The SEC’s lawsuit against Binance, filed in June 2023, accused the exchange and its founder, Changpeng Zhao, of violations including misleading investors about trading controls, inflating trading volumes, and commingling customer funds. The case, seen as a cornerstone of the SEC’s crackdown on crypto under former Chair Gary Gensler, was voluntarily dismissed on May 29, 2025, via a joint stipulation filed in a Washington, D.C., federal court. The dismissal was “with prejudice,” meaning the SEC cannot refile the same claims, and was deemed appropriate “in the exercise of its discretion and as a policy matter,” according to court filings cited by multiple sources.
A Binance spokesperson welcomed the move, calling it a “major milestone” and expressing gratitude to new SEC Chairman Paul Atkins and the Trump administration for shifting away from “regulation by enforcement,” as noted in posts on X. This dismissal aligns with a broader trend, with the SEC also dropping or pausing cases against other crypto firms like Coinbase and Kraken in 2025, reflecting a possible policy shift under new leadership and President Donald Trump’s pro-crypto stance. The crypto market, with a capitalization estimated at $2.5 trillion in 2025, may see increased confidence as regulatory risks ease.
Staking Clarified for Proof-of-Stake Networks
In another key development, the SEC’s Division of Corporation Finance reportedly issued guidance on May 29, 2025, stating that certain staking activities on proof-of-stake networks do not constitute securities transactions. Staking involves locking crypto assets like Ethereum to support blockchain networks, earning rewards for validating transactions. This clarification addresses years of uncertainty, as prior SEC leadership had suggested staking might fall under securities laws, requiring registration and oversight.
The guidance covers self-staking (users staking their own assets), self-custodial staking (delegating to node operators while retaining ownership), and custodial staking (third parties stake on behalf of users), emphasizing that rewards are compensation for network services, not profits from others’ efforts. However, liquid staking and restaking, where providers control staking decisions, may still face scrutiny. SEC Commissioner Caroline Crenshaw dissented, arguing the guidance contradicts existing laws and court precedents, potentially creating uncertainty, while industry voices like Michael Bacina of Global Digital Finance praised the clarity. This aligns with prior SEC guidance that Bitcoin mining does not implicate securities laws, offering hope for projects like Solana.
Impact on DeFi and the Market
These moves come as the DeFi sector thrives, with the total value locked (TVL) in DeFi protocols surpassing $100 billion in 2025, up significantly from prior years, per industry trackers like DeFiLlama. The table below shows estimated TVL growth for major proof-of-stake networks:
Network TVL (May 2024) TVL (May 2025) Growth (%) Ethereum $50 billion $65 billion 30% Solana $10 billion $14 billion 40% Cardano $5 billion $6.5 billion 30%
Source: Estimated from DeFiLlama trends, 2025
The staking clarification could boost adoption, as Ethereum alone has over 30 million ETH staked, valued at roughly $90 billion at current prices. However, market volatility persists—$345 million was liquidated in one hour on May 29, 2025, highlighting risks in the crypto space. The SEC’s shift, influenced by Trump’s pledge to make the U.S. a crypto hub and new Chair Paul Atkins’ focus on clear rules, may encourage innovation. Yet, the agency continues oversight, suing Unicoin on May 20, 2025, for allegedly fraudulent $100 million token raises.
What’s Next for Crypto
The SEC’s actions suggest a pivot toward engagement over enforcement, with roundtables led by Commissioner Hester Peirce and Chair Atkins aiming for a clear regulatory framework. For DeFi users, this means safer participation in staking and trading on exchanges like Binance. Still, experts caution that oversight remains—bad actors won’t get a free pass. As the $100 billion DeFi market eyes further growth, these changes could mark a new chapter for crypto in the U.S.
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