Crypto Shrugs Off SEC Action Against Cumberland

Thursday’s announcement that the U.S. Securities and Exchange Commission (SEC) had filed charges against crypto market maker and liquidity provider Cumberland DRW barely stirred the crypto market. Despite Bitcoin briefly dipping below $60,000 prior to the news, the world’s largest cryptocurrency has since stabilized, according to data from CoinGecko.

Resilience in the Face of Regulation

The muted market reaction highlights the growing confidence among crypto investors when facing regulatory challenges. “The crypto market has learned—from Ripple, Coinbase, Grayscale, and others—that well-funded companies have a pretty good chance if they are willing to argue with the SEC in court,” said Matt Hougan, Chief Investment Officer at Bitwise. Cumberland, part of the larger DRW Trading Group, has already indicated that it intends to contest the SEC’s accusations.

Cumberland’s Battle with the SEC

On Thursday, the SEC alleged that Cumberland had engaged in trading crypto assets that are classified as securities under U.S. law, specifically targeting their trades on third-party exchanges. While the charges may seem significant, the market’s response suggests traders aren’t overly concerned. Cumberland’s parent company, DRW, has previously faced regulatory scrutiny, having been sued by the Commodities and Futures Trading Commission (CFTC) in 2018 over allegations of market manipulation. In that case, DRW emerged victorious, as the court ruled that the CFTC failed to meet the burden of proof.

This history likely bolstered market confidence that Cumberland can withstand the SEC’s latest legal challenge.

Targeting Key Cryptos

The SEC’s complaint also singled out several major cryptocurrencies, including Solana, Polygon, Cosmos, Algorand, and Filecoin, by classifying them as securities. While this would generally be seen as negative news for these assets, they have remained among the least impacted cryptos in the past 24 hours, indicating traders are largely undeterred by the regulator’s accusations.

A Shifting Regulatory Landscape

As the SEC ramps up its regulatory enforcement, its Chair, Gary Gensler, finds himself facing increasing pressure from political forces in Washington. According to Ryan McMillin, Chief Investment Officer at Merkle Tree Capital, Gensler’s days at the SEC may be numbered. “There is no last-minute change of tact from Gensler’s hostility towards the industry, and he is almost certainly in the last months of his role,” McMillin said, noting that a shift in the administration could see Gensler replaced.

The SEC’s latest move against Cumberland DRW appears to be another chapter in the long battle between regulators and the crypto industry. Yet, as history has shown, well-resourced firms willing to stand their ground in court can succeed. With Bitcoin steady and key assets like Solana and Polygon holding their value, it seems the market remains confident that Cumberland will prevail.