SEC Reverses Course on Case Against Coinbase as US Softens Crypto Regulation

US regulators seem to be softening their stance on
cryptocurrency under Trump’s pro-crypto administration. The Securities and
Exchange Commission (SEC) just agreed to dismiss its lawsuit against Coinbase. This development, announced by the exchange, marks a
significant victory for the exchange, after heightened scrutiny in the previous
administration.

“SEC staff has agreed in principle to dismiss its
unlawful enforcement case against Coinbase, subject to Commissioner approval—righting a major wrong. We’ve always maintained that we were right on the facts
and the law, and today’s announcement confirms that this case should never have
been filed in the first place,” the exchange announced today (Friday).

A Long and Costly Legal Battle

The lawsuit, which accused Coinbase of operating as an
unregistered securities broker, has been a focal point in the broader
regulatory battle between crypto firms and US authorities.

The SEC’s lawsuit against Coinbase, filed in June
2023, was part of a broader crackdown on the cryptocurrency industry. The
agency sought to categorize many crypto firms and their services as
securities-related businesses requiring registration.

Coinbase CEO Brian Armstrong emphasized the
significance of the SEC’s reversal, stating, “If this goes through, it’s a
really big deal, not just for us, but for the whole crypto industry. The 50
million Americans who hold crypto, and I think for the rest of the world
because this is an important signal about where things are going.”

https://t.co/0iY0E7Mc9q pic.twitter.com/hVsGpnpNZd

— Brian Armstrong (@brian_armstrong) February 21, 2025

Coinbase, which went public in April 2021 after SEC
approval, argued that its business model had remained unchanged and that the
lawsuit was unjustified.

Coinbase has long maintained that the SEC’s case was
unjustified and politically motivated. “What changed over those two years was
the political leadership at the SEC,” Coinbase stated. “In its war against
crypto, it acted as if it was above the law, usurping the power of Congress as
set forth in the Constitution.”

The exchange criticized the SEC’s approach, arguing
that regulatory uncertainty has stifled innovation and placed unnecessary
financial burdens on companies operating in the space. Millions in legal costs,
extensive employee hours, and years of litigation have shaped this battle,
underscoring the need for clearer legislative frameworks.

The latest announcement seems to have boosted the prices of several cryptocurrencies. At the time of publication, Bitcoin was nearing 100k, trading at $98,674, representing a 1% and 1.3% increase in the past day and week, according to CoinMarketCap. Early this year, a federal appeals court ruled in favor of Coinbase, faulting the SEC over its refusal to establish clear regulations for cryptocurrency.

A Win for the Industry

While the lawsuit’s dismissal is a significant win for
Coinbase, its broader impact on the industry is even more notable. The company
believes this outcome reinforces the need for long-term legislative clarity to
ensure the US remains competitive in the global crypto economy.

🇺🇸 JUST IN: The Third Circuit Court of Appeals found the SEC’s rejection of Coinbase’s request for clearer crypto rules to be unfair and poorly explained. The court sent the case back to the SEC for a better explanation but did not force the agency to start creating new rules… pic.twitter.com/PaSMnhi5hW

— Cointelegraph (@Cointelegraph) January 13, 2025

Coinbase emphasized that regulatory clarity could
attract new capital inflows, modernize financial systems, and lower consumer
fees. The company envisions a future where “the majority of global GDP runs on
crypto rails” and argues that the US must take proactive steps to embrace this
transformation rather than being left behind.

With the SEC’s lawsuit likely ending,
attention now turns to potential legislative action. Coinbase has called for
Congress to establish clear guidelines to prevent future regulatory overreach
and provide certainty for businesses and investors alike.

This article was written by Jared Kirui at www.financemagnates.com.