The U.S. Securities and Exchange Commission (SEC) permanently dismissed its lawsuit against Coinbase on Feb. 27, court filings reveal. Furthermore, the agency withdrew its June 2023 allegations and halted an interlocutory appeal. This follows a Feb. 21 agreement between both parties, ending a nine-month legal clash. The dismissal “with prejudice” bars the SEC from reopening the case, finalising Coinbase’s victory.
Regulatory Shift
The SEC’s reversal signals a broader policy overhaul under acting Chair Mark Uyeda, appointed after Gary Gensler’s departure. Previously, the agency pursued strict enforcement, targeting Coinbase, Robinhood, and Gemini. However, Uyeda criticised this approach, urging “transparent” crypto regulation.
Following this, the SEC established a Crypto Task Force led by Commissioner Hester Peirce, a long-time industry advocate, signalling renewed strategy.
Coinbase’s Legal Victory
Coinbase’s Chief Legal Officer Paul Grewal celebrated the dismissal, calling it a win against regulatory overreach. The SEC had accused Coinbase of operating unregistered services and listing “securities” like Solana and Cardano.
Nevertheless, Grewal argued the agency approved Coinbase’s 2021 Nasdaq listing before suing. Industry leaders now anticipate reduced legal threats, following similar case drops against Consensys and Uniswap.
SEC’s Enforcement Backlash
Critics slammed the SEC’s “regulation-by-enforcement” tactics under Gensler, which sparked confusion and legal battles. Conversely, Uyeda emphasised collaboration, stating, “It’s time to rectify our approach.”
The SEC abandoned its strict interpretation of the Howey test, used to classify crypto tokens as securities. This pivot aligns with Republican leadership’s push for clearer guidelines, though Democrats warn of lax oversight.
Shift in Crypto Regulation to Congress
With SEC cases dissolving, lawmakers face mounting pressure to legislate crypto rules. Coinbase’s Grewal confirmed shifting focus to Congress, seeking “favourable” laws. Also, the exchange contributed over $160 million to backing pro-crypto candidates.
The SEC’s Peirce urged legislative action, stating, “Fundamental questions about securities definitions must be answered by Congress, not courts.”
Coinbase’s Legislative Lobbying Efforts
Coinbase now champions the Fairshake PAC. The PAC’s corporate-heavy spending has already influenced special elections, prioritising crypto-friendly policies. Furthermore, Grewal hinted at intensified lobbying for bills like the FIT21 Act, which clarifies crypto oversight. However, progressive groups oppose the push, fearing reduced investor protections.
Implications for Crypto
The SEC’s retreat leaves critical questions unresolved, including token classification and exchange registration. While the agency paused cases against Binance and Tron, Congress must now address regulatory gaps. Coinbase still faces SEC document requests and a separate rulemaking petition. Ultimately, the crypto industry views this dismissal as a turning point, though lasting clarity hinges on legislative action.
“Goodbye, and good riddance,” Grewal posted on X, capturing industry relief. As crypto firms rally behind bipartisan bills, the SEC’s softened stance may accelerate long-awaited regulatory frameworks. For now, market players celebrate a stalemate but the battle for legal certainty continues.
