The crypto industry continues to rack up wins under President Donald Trump’s administration.
Coinbase, the most prominent crypto exchange in the U.S., announced Friday morning that the Securities and Exchange Commission had agreed to dismiss a consequential lawsuit against the publicly traded company.
“SEC staff has agreed in principle to dismiss its unlawful enforcement case against Coinbase, subject to Commissioner approval—righting a major wrong,” Paul Grewal, the chief legal officer of Coinbase, said in a blog post.
The SEC declined to comment. Both the court dockets for Coinbase’s appeals case against the regulator and for the SEC’s initial lawsuit haven’t been updated. Grewal said the in-principle dismissal is still subject to the approval of SEC commissioners, and Brian Armstrong, the CEO of Coinbase, said approval is expected next week.
The potential dismissal of the lawsuit against Coinbase comes as Trump has embraced crypto in his second term as president. He has installed an AI and crypto czar, issued a pro-crypto executive order, and even launched his own memecoin, $TRUMP.
Meanwhile, Trump has named Paul Atkins, a pro-crypto commissioner, to head the SEC. While Atkins has yet to be confirmed, acting chair Mark Uyeda has steered the agency away from its more aggressive approach to crypto enforcement under former chairman Gary Gensler.
Uyeda has launched a new task force to develop new rules for the crypto industry. He has also cut back on and rebranded SEC’s crypto enforcement unit. And his agency has paused its litigation against Binance, the world’s largest crypto exchange, citing the regulator’s new approach to crypto regulation.
Gensler crackdown
In the previous presidential administration, Gary Gensler, then chairman of the SEC, spearheaded a series of enforcement actions against the blockchain industry after the crypto exchange FTX collapsed in November 2022 amid an $8 billion shortfall in customer funds.
He sued crypto exchanges Gemini, Kraken, and a slew of other industry firms for allegedly violating securities laws. The enforcement actions further escalated in June 2023 with lawsuits against Binance and, one day later, Coinbase. The SEC alleged that certain cryptocurrencies Coinbase listed on its exchange, including Solana and Cardano, were securities, or financial assets under the purview of the SEC, such as stocks and bonds.
Because Coinbase listed the alleged securities without prior approval from the SEC, they were in violation, argued the SEC.
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: The consequences for the investing public are far too great,” Gurbir S. Grewal, director of the SEC’s division of enforcement, said when the lawsuit was first filed.
The crypto lobby
Coinbase, and the crypto industry as a whole, were incensed and argued that cryptocurrencies were new financial assets that did not fit into decades-old financial law. The legal definitions were unclear, and judges were split as parallel cases against different crypto companies worked their way through the courts.
Coinbase’s case appeared before Judge Katherine Failla in the Southern District of New York. In March 2024, she largely rejected Coinbase’s motion to dismiss the lawsuit, disagreeing that the SEC had violated Coinbase’s right to due process by not providing “fair notice” of which crypto assets should be considered securities. She also rejected Coinbase’s argument that the “Major Questions doctrine,” a legal principle that limits agency supervision over issues of major political and economic significance, should apply to the crypto industry.
Despite the setback for Coinbase, the crypto exchange asked for an interlocutory appeal—meaning the case would move to the appeals stage before the judge reached a final decision—amid disagreement at the district court level. Failla granted the request last month.
Meanwhile, Coinbase pushed its case in the public sphere.
Brian Armstrong, the CEO of Coinbase, joined forces with industry leaders like Brad Garlinghouse, the CEO of Ripple, to launch an unprecedented influence campaign to sway politicians to support crypto. They spent more than $130 million up and down the ballot to elect pro-crypto candidates in the 2024 elections, according to data compiled by Molly White, a crypto researcher.
And after Trump was elected, Armstrong met privately with the 47th president. Then, Coinbase and a host of other top crypto companies, including Kraken and Ripple, each donated $1 million to Trump’s inauguration fund. The SEC’s decision to drop the lawsuit came just a month after Gensler resigned as chair of the SEC.
“I have to give credit here to the Trump administration, for winning the election, and for the departure of the activist head of the SEC, Gary Gensler,” Armstrong said.
