SEC to End Lawsuit Against Coinbase, Signaling New Crypto Approach
Coinbase (COIN.O) is set to see the U.S. Securities and Exchange Commission (SEC) withdraw its lawsuit against the cryptocurrency exchange, concluding a long-standing legal battle. This move marks a significant shift in the SEC’s strategy for overseeing the crypto sector, particularly under the new Republican leadership.
The logo for Coinbase Global Inc. is displayed on a jumbotron in Times Square.
The SEC’s change in direction follows a period of aggressive enforcement under previous leadership.
“The war against crypto, at least as it applies to Coinbase, is over,” said Coinbase Chief Legal Officer Paul Grewal.
Under the previous Democratic leadership, the SEC had taken a hard stance on the crypto sector.
The SEC’s shift comes as Republican officials begin to reshape the agency’s policies.
The SEC had sued Coinbase and rival trading platform Binance in 2023. The agency alleged Coinbase violated rules by facilitating trading in crypto tokens that should have been registered as securities.
Coinbase’s “staking” program, where assets are pooled to verify blockchain network activity, was also targeted. The SEC argued this program should have been registered.
Coinbase maintained that crypto assets do not match the definition of an investment contract. A key test is whether people invest in a common enterprise expecting profit.
Better Markets criticized the SEC’s decision, saying it’s “a historic mistake.”
Analysts at Piper Sandler viewed the case’s dismissal as removing a major obstacle.
The SEC’s new leadership, with Mark Uyeda and Hester Peirce, is pushing for new, crypto-specific regulations, differing with the earlier approach.
“We have a very positive, productive relationship with this new SEC and are working arm in arm with them to get this addressed,” Grewal stated.
Peirce, often called “crypto mom,” is leading efforts to overhaul policy, holding meetings to discuss changes. The shift in enforcement is happening quickly.
Richard Levin, chair of Fintech practice at Nelson Mullins Riley & Scarborough law firm, anticipates major case resolutions in the coming months.
This change aligns with former President Donald Trump’s signals of a crypto-friendly stance and pledges to promote digital asset adoption.
In an executive order, Trump aimed to protect banking services for crypto companies, despite industry claims of banks being directed to cut off services – a claim denied by regulators.
