Cryptocurrency Exchange Coinbase said Friday that the Securities and Exchange Commission has agreed to withdraw its lawsuit against the company, lifting legal clouds in the global crypto industry, and signaling a broader setback by federal regulators.
Coinbase said its website posting and regulatory submissions have reached a principle agreement with the SEC to withdraw the lawsuit without financial penalty. If the SEC confirms the proposed settlement, it will be a noticeable reversal by the institution after years of legal battles against crypto companies.
The SEC sued Coinbase, the largest US cryptocurrency company, in 2023, in 2023, on the ground that digital currencies sold on the platform constituted unregistered securities that put consumers at risk of financial harm. I did.
A settlement that results in the dismissal of the case requires approval from a member of the SEC. The agency spokesman declined to comment on Coinbase's announcement.
The lawsuit is the most important of some of the SEC's filings against major crypto companies, claiming they are operating prohibitively. The victory for the government could have threatened the ongoing operations of Coinbase, a publicly traded company worth around $65 billion, and destroyed the broader crypto market.
The firing has been the biggest victory for the crypto industry since President Trump took office last month, pledging to end the Biden administration's crackdown on Crypto under former SEC chairman Gary Gensler. And it highlights the growing influence of billionaire tech executive Washington, writing huge checks to support Trump's campaign, hoping to ensure softer regulations.
Coinbase Chief Justice General Paul Grewal said in an interview that the deal “is nothing but a complete victory.” Coinbase does not have to admit fraud or pay a fine. The agency agreed to dismiss the case on prejudice, meaning it could not bring the case back.
“The case disappears as if it's never been filed,” Grewal said.
On Friday, he discussed the resolution proposed in a blog post entitled “Sighting a Massem Furne.”
Dennis Kelleher, chief executive of Better Markets, a nonprofit that increases transparency on Wall Street, said the SEC's apparent “one-sided surrender” was a committee that regulates markets and protects investors. He said it undermines confidence in his ability.
“The SEC was enforcing the law without fear or favor, but now we are afraid of crypto kingpin, a billionaire who supports the crypto industry and publicly disregards,” Kelleher said. I did.
Coinbase operates as a cryptocurrency market. It is a platform that allows investors to easily convert the dollar into digital assets such as Bitcoin and ether. Each time a sale passes, the company collects a fee.
Coinbase was launched in 2021, a landmark in the US crypto industry. Founder and CEO Brian Armstrong quickly became one of the wealthiest technical executives in the country.
But the following year, the collapse of FTX, one of Coinbase's top rivals, sent Crypto Markets into the meltdown. Mr. Gensler accelerated the industry crackdown that he began when he took over from the agency in 2021.
His legal argument was simple. Virtually all cryptocurrencies are securities, like stocks and bonds traded on Wall Street. Anyone who offers them must register with the SEC and follow strict rules to protect investors. He argued that the Supreme Court a century ago ruled on what constituted investment contracts and should manage digital assets.
As the top US cryptocurrency vendor, Coinbase has become one of Gensler's main targets. In a 2023 lawsuit, the SEC alleged that the company “has increased interest in increasing profits on investors' interests and increasing profits on compliance with the law.”
Under Gensler, the agency has filed similar lawsuits against other top crypto markets like Binance and Kraken. (These cases are still pending.) Crypto executives alleged that Gensler was using unfair enforcement measures and outdated playbooks to regulate the rapidly growing industry. They approached the Commodity Futures Trading Commission, a regulator that is much smaller and less offensive than the SEC, for federal law that ended up overseeing the industry.
A complex legal battle has continued, with judges from various jurisdictions sometimes issued conflicting opinions about the legal status of cryptocurrencies. Last year, the judge who oversaw the Coinbase case set the stage for a long-standing legal battle that could have reached the Supreme Court, denying the company's motion to dismiss the case.
But while crypto companies were fighting the SEC in court, the industry was mobilizing to reconstruct the political landscape.
Crypto executives threw support behind Trump, who started his own crypto business last year. Wealthy tech investors like Mark Andreesen, whose ventures are the leading crypto investor, cited Trump's support for digital currency as the main reason for his support.
The crypto industry also tried to influence Congress. Coinbase was one of the top funders for Fairshake, a crypto super PAC, which has donated more than $130 million to legislative candidates.
Since his victory, Trump has taken a series of steps to promote industry interests. He chose David Sacks, a crypto enthusiast venture investor, as the “crypto and AI emperor” of the White House. He then appointed Paul Atkins, a securities lawyer who consulted with the crypto company, to lead the SEC.
While Atkins waits for confirmation, Republican SEC Commissioner Mark T. Weda leads the agency. This month, the SEC reduced its crypto enforcement efforts and reassigned lawyers who worked on a team of 50 people dedicated to crypto cases.
Former federal judge Grewal rejected the name of an SEC official who negotiated the resolution of the lawsuit at Coinbase. However, he said the deal had “full leadership support.” Next week, he said the agency's commissioner will vote for approval of the transaction, a process he described as formality.
“Our incident ends with the SEC surrender and such harsh conditions, providing a model and template,” Grewal said. “We hope that these first cases will fall, not ours.”
However, some former SEC attorneys have expressed concern about the fallout from the decision.
John Reed Stark, a former SEC enforcer and now a regulatory consultant, said it is rare for the committee to dismiss cases like Coinbase. He said it could affect the morale of SEC staff.
“This fundamental turnabout never happened,” Stark said. “They've already cut the crypto units in half. Everyone who worked in this group is absolutely devastated.”
