- Move would end years-long legal battle
- SEC under Trump has quickly overhauled approach to crypto
- Federal judge has paused SEC lawsuit against Binance
Feb 21 (Reuters) – Coinbase (COIN.O), opens new tab said on Friday the U.S. securities regulator planned to withdraw its lawsuit against the crypto exchange, ending a contentious years-long legal battle once considered existential for the trading platform and the broader sector.
The Securities and Exchange Commission has moved quickly to overhaul its approach to policing the crypto sector under Republican leadership since President Donald Trump took office. The agency has established a dedicated task force and rescinded key crypto-related accounting guidance.
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The SEC, which declined to comment, has been expected to review pending court cases and walk back its litigation even before overhauling its regulations, Reuters previously reported. Still, the decision to recommend dismissing its lawsuit against Coinbase, one of a number of lawsuits brought under the SEC’s prior chair, would be the most dramatic move yet under the acting Republican leadership.
“The war against crypto, at least as it applies to Coinbase, is over,” Coinbase Chief Legal Officer Paul Grewal said in an interview.
In a blog post, the exchange said SEC staff has “agreed in principle” to dismiss the case, although the final decision has not yet been voted on by the commission.
Republican officials at the SEC have immediately begun to overhaul the agency’s crypto policies, even before the arrival of Paul Atkins, Trump’s crypto-friendly pick for SEC chair.
Revisiting cases against crypto firms – especially those which violated the SEC’s rules but were not alleged to have defrauded investors – has been broadly anticipated, though many legal experts told Reuters they expected the SEC to seek settlements and any mass effort to dismiss all pending matters would be seen as unprecedented.
The SEC sued both Coinbase, the largest U.S. crypto exchange, and rival trading platforms Binance in 2023. A court has separately paused the agency’s lawsuit against the other firm after a request from the SEC and Binance, citing implications of the new task force.
The agency also sued crypto exchange Kraken in 2023.00:09Drones tackle Everest’s trash crisis, hauling gear up and garbage down
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The SEC alleged Coinbase flouted its rules and facilitated trading in at least 13 crypto tokens that it said should have been registered as securities.
The lawsuit also targeted Coinbase’s “staking” program, in which it pools assets to verify activity on blockchain networks and takes commissions, in exchange for “rewards” to customers. The SEC said that program should have been registered with the agency.
Coinbase has argued that crypto assets, unlike stocks and bonds, do not meet the definition of an investment contract, a position held by the vast majority of the crypto industry. As outlined in a U.S. Supreme Court case, a key test for whether an investment product is a security is whether people are investing in a common enterprise with the expectation of profit.