O'Melveny Insights 2023

14 What happens to crypto if the SEC leans harder on enforcement to regulate the market? The question of what will happen to the crypto market in 2023 if courts rule that digital assets are, in fact, securities, emboldening the SEC, is no longer the question. Or at least not the only question, because, securities or not, investigators and regulators— at both the federal and state levels—will not hesitate to pursue any company in the cyberworld. The SEC hasn’t waited for any court to rule on crypto, and after the astonishing collapse of FTX in November, no regulatory agency will hesitate to investigate any entity in the digital asset world. The SEC, for one, had already been taking a hard line, initiating enforcement actions across broad parts of the industry. And, in 2023, all regulators—the DOJ, the CFTC, FinCEN, the CFPB, and the IRS—are likely to continue the aggressive crack down. 04