SEC Set to Dismiss Coinbase Lawsuit A Sign of the End of Crypto Crackdown
The US Securities and Exchange Commission (SEC) is moving to dismiss a multi-year lawsuit against Coinbase, marking a significant shift in the agency’s approach to the cryptocurrency industry. The move is part of a broader overhaul of the SEC under new leadership after former Chairman Gary Gensler left the post in January.
New Signals From the SEC
Coinbase announced on Friday that the SEC will formally dismiss the lawsuit, which many experts see as a positive sign for the cryptocurrency industry. This is a move to affirm the regulator’s impartiality and put an end to the tough measures the SEC has taken in the past, according to Teresa Goody Guillén, a partner at law firm BakerHostetler and a former SEC attorney.
The SEC has been suing Coinbase since 2023, alleging that the exchange operated as an unregistered exchange, broker, and clearinghouse. Coinbase filed an appeal in April, citing legal differences on cryptocurrencies. The court later granted the appeal, a rare and favorable decision for Coinbase.
What the Decision Means
In the case, the SEC listed several tokens including SOL, ADA, MATIC, FIL, SAND, AXS, NEAR, and DASH as securities. However, Goody Guillén said the dismissal of the case does not mean the SEC will change its stance on how to classify digital assets in the future.
Rebecca Rettig, chief legal officer at Jito Labs, said the move reflects the SEC's recognition that the "regulation by enforcement" approach is not working. Protracted litigation is time-consuming, costly, and does not benefit consumers or the growth of businesses in the United States, she said.
Cathy Yoon, general counsel of the Wormhole Foundation, said that while there is no clear decision on whether Coinbase tokens are securities, there is hope that they will not be classified that way. She also questioned whether Kraken and Binance would receive similar treatment.
SEC Changes
After Gary Gensler left his post in January, the SEC has made significant changes. Acting Chairman Mark Uyeda has created a crypto task force led by Commissioner Hester Peirce, with plans to rewrite how the industry is regulated.
Paul Grewal, chief legal officer of Coinbase, said the company has begun discussions with the SEC to reshape how crypto is regulated in the United States. He noted that under Gensler, the SEC has filed several lawsuits against cryptocurrency companies such as Kraken, Bittrex, and Binance for violating registration requirements.
Grewal hopes that the SEC’s dismissal of the Coinbase case will lead to other lawsuits, especially those that do not involve fraud or misconduct. He also criticized Gensler’s approach, saying it has “not yielded any significant results.”
Moving Forward
Coinbase has met with the SEC several times in recent weeks and has maintained that it did not violate the rules. Grewal said the SEC listened and agreed to dismiss the case without any strings attached.
The next step is for the full SEC to vote on Thursday to formally approve the dismissal. While Acting Chair Uyeda and Commissioner Peirce are expected to support it, Commissioner Caroline Crenshaw has yet to take a position. Crenshaw has been skeptical of cryptocurrencies in the past, especially after the SEC approved spot Bitcoin trading products earlier this year.
“Hopefully, Commissioner Crenshaw will change her mind. But regardless of how she votes, with the support of the SEC leadership, the case will be dismissed,” Grewal said.
Conclusion
The SEC’s expected dismissal of the Coinbase lawsuit marks a significant turning point, signaling a shift in the regulator’s approach to the cryptocurrency industry. The decision not only sends a positive signal to exchanges, but could also pave the way for more flexible policies in the future, allowing cryptocurrencies to thrive in the United States.
