US Securities Regulator to Drop Lawsuit Against Coinbase, Firm Says

Coinbase said on Friday the US 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 The agency has established a dedicated task force and rescinded key crypto-related accounting guidance.

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 US 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.

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 US 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.

Better Markets, which advocates for stricter government oversight of the financial sector, said the SEC dropping its lawsuit against Coinbase would be "a historic mistake."

"The SEC used to enforce the law without fear or favor but is now favoring the crypto industry and fearing billionaire crypto kingpins who are publicly belittling the agency," said Dennis Kelleher, president and CEO of the group, in a statement.

Shares in Coinbase opened up more than 3.5 percent as investors cheered the news. Analysts at Piper Sandler said in a research note the dismissal of the case "removes a significant overhang that we believe has kept some investors on the sidelines for nearly two years."

Arm to Arm

Gary Gensler, the former Democratic agency chair, had made fighting misconduct in a sector he termed the "wild west" a priority for the SEC, targeting not only fraudsters but also the large firms that facilitate trading such as Coinbase. The regulator boosted the size of the crypto enforcement unit as part of that effort.

The SEC has now scaled back that crypto enforcement effort, reassigning lawyers and earlier this week renaming the unit to focus on "cyber and emerging technologies".

Acting SEC Chair Mark Uyeda and fellow Republican Commissioner Hester Peirce have taken issue with Gensler's approach to litigation, arguing instead for new crypto-specific rules.

"We have a very positive, productive relationship with this new SEC and are working (in) lock step with them, arm in arm, to get this addressed," Grewal said.

Peirce, dubbed "crypto mom" by many in the sector, is leading the agency's new efforts to overhaul its policy. The new task force has held at least eight meetings to discuss changes, according to public logs available on the SEC's website.

“I would not be surprised to see major cases resolved in the next couple months," said Richard Levin, chair of Fintech practice at Nelson Mullins Riley & Scarborough law firm. "There are other matters under investigation that also more than likely are being reviewed.”

In his first week in office, Trump ordered the creation of a cryptocurrency working group tasked with proposing new digital asset regulations and exploring the creation of a national cryptocurrency stockpile, making good on his promise to quickly overhaul US crypto policy.

Trump on the campaign trail pledged to be a "crypto president" and courted cash from the industry by promising to promote the adoption of digital assets.

In an executive order, Trump also ordered that banking services for crypto companies be protected, alluding to industry claims that US regulators have directed lenders to cut crypto companies off from banking services -- something regulators deny.

© Thomson Reuters 2025

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