The cryptocurrency industry is counting on the federal courts to survive a sweeping enforcement crusade by Wall Street’s top regulator.

But that bet is beginning to backfire.

A string of legal victories by the Securities and Exchange Commission has jolted some of crypto’s biggest players and shaken the industry as it strives for greater credibility in Washington.

Judges have recently rebuked claims that the SEC lacks authority to police the market. Coinbase, the largest U.S. exchange, lost a bid to throw out charges that it is violating investor-protection rules. And a New York jury found one-time billionaire entrepreneur Do Kwon and his firm liable for fraud.

Now, the crackdown is about to expand, with the SEC preparing for a new round of lawsuits.

“The SEC just keeps winning,” said John Reed Stark, a former agency attorney and prominent crypto critic. “The law is catching up.”

The legal onslaught, which gained new momentum after the collapse of Sam Bankman-Fried’s FTX empire in late 2022, is posing a threat to the industry and raising the stakes for the army of industry lobbyists seeking to convince lawmakers of the need for new, favorable rules for the market.

The clash underscores fundamentally different views of the emerging industry: Many federal officials like SEC Chair Gary Gensler are highly suspicious, seeing the market as riddled with corruption and a danger to investors. Crypto backers, including GOP lawmakers, see the business as the wave of the future in finance and want to nurture it.

“More and more we’re going to see the industry be willing to fight,” said Ladan Stewart, who was a crypto enforcement attorney at the SEC until earlier this year. “These are existential issues for them.”

The Department of Justice has also stepped up its attacks. Bankman-Fried was sentenced in March to 25 years in prison for fraud and conspiracy. The next month, a 28-year-old crypto trader was found guilty of manipulating markets in the first criminal case of its kind in the U.S.

And while the billionaire former Binance CEO Changpeng Zhao was sentenced on Tuesday to just four months in prison, prompting outrage from many crypto critics, the DOJ is pressing lawmakers for the ability to pursue longer sentences when prosecuting such anti-money laundering violations.

But it’s the SEC crackdown that is raising foundational questions about crypto’s future.

Gensler has been among the industry’s most implacable foes, saying most crypto tokens are unregistered securities that are being sold illegally and blasting the industry as “rife with fraud, scams, bankruptcies and money laundering.” His opposition has been so unwavering that many in the industry are holding out hope that he leaves the agency after the November elections.

The legal scrutiny from the SEC and DOJ contrasts with the efforts by many lawmakers in Washington to find a path forward to regulate the industry to help it grow.

House Republicans led by Financial Services Chair Patrick McHenry and Agriculture Chair G.T. Thompson, as well as some Democrats, are pushing for legislation that could address what the industry has bemoaned as uncertainty about the market’s place in financial regulation. The efforts have stagnated in the House and face deep skepticism in the Senate.

Still, there is an appetite on Capitol Hill for more tailored crypto legislation, including a move to regulate a specific type of token known as stablecoins, which are designed to maintain a value linked to traditional assets like the dollar. McHenry and Rep. Maxine Waters of California are trying to hammer out a deal.

Underpinning the SEC’s clash with the industry is a debate over whether much of crypto is covered by the same rules that govern stock and bond trading. The SEC argues that it is and that crypto firms should be regulated by the agency, just as their legacy-finance counterparts are. Crypto executives and lawyers disagree, saying digital assets are entirely different from traditional securities and need a new set of rules from Congress.

“The SEC has a mandate to regulate securities — not technology,” said Joe Lubin, co-founder and CEO of crypto firm Consensys Software.

But the SEC’s arguments are gaining traction in the courts, securities lawyers say. In the case of Coinbase, the agency recorded a critical win in March when Judge Katherine Polk Failla of the Southern District of New York largely rejected the company’s arguments for throwing out the charges.

Failla ruled that crypto exchanges are not immune from securities laws, while rebuking claims that the SEC was operating outside its authority and that it failed to properly lay out the law ahead of time. Her ruling followed a similar finding last year in the SEC’s case against Kwon and his firm Terraform Labs. The SEC is seeking $5.3 billion in fines from them.

“We’ve been accused of picking winners and losers, stifling innovation and driving crypto businesses to more favorable, foreign jurisdictions, wherever they may be,” SEC Enforcement Director Gurbir Grewal said in a recent speech. But, Grewal added, “as court after court has confirmed, the federal securities laws apply equally to everyone. You don’t get your own rules.”

An SEC spokesperson declined to comment for this story.

Of course, the SEC’s winning streak is an early development in a legal battle that promises to last years — especially with crypto currently trading at prices not seen since before the market’s crash two years ago. The industry, meanwhile, has shown no signs of bowing to the SEC’s demands.

Coinbase has moved to escalate a central part of its case to an appellate court and has vowed to bring it to the Supreme Court if need be. Others like Consensys are suing the SEC before they get sued themselves.

“You’re now seeing company after company take the fight to the SEC,” Coinbase Chief Legal Officer Paul Grewal said. “It’s almost as if many of us have been left with no choice.”

Crypto lawyers point out the industry has netted its own court victories. While Failla’s ruling largely sided with the SEC, the judge also dismissed one part of the agency’s case against Coinbase alleging that the company operated as an unregistered broker through its Wallet application.

“I feel like we’re winning,” said Blockchain Association CEO Kristin Smith, whose group sued the SEC last month over a new rule aimed at “dealers” in the securities markets. “The crypto industry is feeling like you can take on the SEC and win.”

But the SEC’s enforcement sweep appears to be on the brink of spreading across the crypto world.

Consensys is facing potential charges from the agency, according to the company’s lawsuit. And the SEC recently warned Uniswap Labs, a decentralized finance company that created one of the world’s largest DeFi exchanges, that staff was preparing to sue.

Uniswap executives have vowed to fight the agency in court.

“The SEC now has momentum on its side,” said Stewart, the former SEC attorney and current partner at White & Case. Stewart expressed doubt over the idea that the recent rulings have given the SEC reason to expand its crackdown, noting that investigations often take years to play out. “But certainly, as the agency thinks about litigation risk in its ongoing investigations and in future investigations, it will take comfort from those decisions.”