In a positive development for the crypto industry, the US Securities and Exchange Commission (SEC) plans to end its 20-month-long legal battle against crypto exchange platform Coinbase and withdraw the enforcement case, a shift from the agency’s previous “regulation by enforcement” approach.
SEC To Dismiss Coinbase Lawsuit
On Friday, Coinbase announced that the SEC’s staff had agreed in principle to drop its lawsuit against the crypto exchange platform. In a video shared on X, the exchange’s CEO, Brian Armstrong, revealed that the US regulator had informed them of their plan to withdraw their litigation against the crypto platform.
He explained that the plan still needs approval from the SEC’s Commissioners, which they hope will happen next week. Armstrong stated that the lawsuit dismissal would be a massive deal for the crypto industry as it signals where the US regulatory approach is headed.
The SEC sued Coinbase in 2023, alleging that the platform was an unregistered securities exchange. The US regulator argued that Coinbase operated as an unregistered broker-dealer and was illegally selling unregistered securities through its staking program.
Following the SEC and Binance’s joint motion to stay their legal battle for 60 days, the industry speculated that other crypto litigations would follow suit. However, Coinbase was in a “unique situation,” journalist Eleanor Terret noted, as the lawsuit was halted in January after Judge Katherine Failla granted a “rare” interlocutory appeal to the exchange.
A month ago, Coinbase filed a petition for permission to appeal, which the SEC had until February 14 to respond to. According to Terret, the agency’s response would shed some light on how the US agency will approach crypto litigations under the new acting chair and new regulatory approach.
Last Friday, the SEC requested an additional 28 days to review the exchange’s petition to appeal and suggested that the recently formed Crypto Task Force would potentially end the extended legal battle.
Crypto Legislation Remains A Key Priority
In a blog post, Coinbase’s CLO, Paul Grewal, called this development a victory “not just for Coinbase, but for our customers, the United States, and individual freedom.” He noted that the SEC is now being held accountable for the enforcement cases driven by a change of political leadership.
Coinbase went public in April 2021. As part of that process, the SEC reviewed our business model and S1 disclosures and allowed us to go public. Two years later, they sued us. That’s despite absolutely nothing changing in our business model. What changed over those two years was the political leadership at the SEC. In its war against crypto, it acted as if it was above the law, usurping the power of Congress as set forth in the Constitution.
Grewal also called for crypto legislation to prevent “rouge regulators” from weaponizing “the lack of clarity again.” This petition follows Coinbase CPO Faryar Shirzad’s call for Congress to act on crypto regulations.
Shirzad recently urged US lawmakers to design a clear and balanced regulatory framework, adding that Congress could take a historic opportunity to “enact thoughtful legislation that provides clarity for innovators and businesses while protecting consumers.”
Grewal closed the post by stating a desire to work with the SEC’s staff to “implement real change” and continue developing the crypto industry in the US.
