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<\/div>\nCoinbase 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.<\/p>\n
The Securities and Exchange Commission has moved quickly to overhaul its approach <\/span>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 The agency has established a dedicated task force and rescinded key crypto<\/span>-related accounting guidance.<\/p>\n 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, t<\/span>he decision to recommend dismissing its lawsuit <\/span>against Coinbase, one of a number of lawsuits brought under the SEC\u2019s prior chair, would be <\/span>the most dramatic move yet under the acting Republican leadership.<\/p>\n \u201cThe war against crypto, at least as it applies to Coinbase, is over,\u201d Coinbase Chief Legal Officer Paul Grewal said in an interview.<\/p>\n Republican officials at the SEC have immediately begun to overhaul the agency\u2019s crypto policies, even before <\/span>the arrival of Paul Atkins, Trump\u2019s crypto-friendly pick for SEC chair.<\/span><\/p>\n Revisiting cases against crypto firms \u2013 especially those which violated the SEC\u2019s rules but were not alleged to have defrauded investors \u2013 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.<\/span><\/p>\n Related:<\/strong> SEC Says No to New Crypto Rules<\/a> | SEC Sues Crypto Exchange Coinbase, One Day After Suing Binance<\/a><\/p>\n The SEC sued both Coinbase, the largest U.S. crypto exchange, and rival trading platforms Binance in 2023. A <\/span>court has separately paused the agency\u2019s lawsuit against the other firm after a request from the SEC and Binance, citing implications of the new task force.<\/p>\n The agency <\/span>also sued crypto exchange Kraken in 2023.<\/span><\/p>\n 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.<\/p>\n The lawsuit also targeted Coinbase\u2019s \u201cstaking\u201d program, in which it pools assets to verify activity on blockchain networks and takes commissions, in exchange for \u201crewards\u201d to customers. The SEC said that program should have been registered with the agency.<\/p>\n 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.<\/p>\n Better Markets, which advocates for stricter government oversight of the financial sector, said the SEC dropping its lawsuit against Coinbase would be \u201ca historic mistake.\u201d<\/span><\/p>\n \u201cThe 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,\u201d said Dennis Kelleher, president and CEO of the group, in a statement.<\/span><\/p>\n Shares in Coinbase opened up more than 3.5% as investors cheered the news. Analysts at Piper Sandler said in a research note the dismissal of the case \u201cremoves a significant overhang that we believe has kept some investors on the sidelines for nearly two years.\u201d<\/span><\/p>\n \u2018ARM IN ARM\u2019<\/span><\/p>\n Gary Gensler, the former Democratic agency chair, had made fighting misconduct in a sector <\/span>he termed the \u201cwild west\u201d a priority for the SEC, targeting not only fraudsters but also the large firms that facilitate trading such as Coinbase. The regulator <\/span>boosted the size of the crypto enforcement unit as part of that effort.<\/span><\/p>\n The SEC has now scaled back that crypto enforcement effort, reassigning lawyers and earlier this week renaming the unit to focus on \u201ccyber and emerging technologies.\u201d<\/span><\/p>\n Acting SEC Chair Mark Uyeda and fellow Republican Commissioner Hester Peirce have taken issue with Gensler\u2019s approach to litigation, arguing instead for new crypto-specific rules.<\/p>\n \u201cWe have a very positive, productive relationship with this new SEC and are working (in)<\/span> lock step with them, arm in arm, to get this addressed,\u201d Grewal said.<\/p>\n Peirce, dubbed \u201ccrypto mom\u201d by many in the sector, is leading the agency\u2019s new efforts to overhaul its policy. The new task force has held at least 8 meetings to discuss changes, according to public logs available on the SEC\u2019s website.<\/span><\/p>\n \u201cIt\u2019s not surprising because this administration, Mark Uyeda and Hester Peirce, their view is that digital assets are not securities by and large. If you have that position, then you cannot assert in any pleading anywhere a digital asset is a security,\u201d said a former chief of the SEC\u2019s office of internet enforcement.<\/span><\/p>\n In his first week in office, Trump <\/span>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 U.S. crypto policy.<\/span><\/p>\n Trump on the campaign trail pledged to be a \u201ccrypto president\u201d and courted cash from the industry by promising to promote the adoption of digital assets.<\/span><\/p>\n In an executive order, Trump also ordered that banking services for crypto companies be protected, alluding to industry claims that U.S. regulators have directed lenders to cut crypto companies off from banking services \u2014 <\/span>something regulators deny.<\/span><\/p>\n Topics<\/span> Lawsuits<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n