The crypto sector has been racking up more victories since President Donald Trump returned to the White House, with the crypto exchange Coinbase the latest beneficiary as SEC agreed to drop the consequential suit.
On Friday morning, the US largest crypto exchange revealed the Securities and Exchange Commission (SEC) agreement to close the consequential lawsuit leveled against it under GaryGensler’s tenure.
A blog post by Coinbase chief legal executive Paul Grewal outlined the in-principle agreement between the SEC staff to abandon the unlawful enforcement case against the Nasdaq-listed Coinbase (COIN).
While the securities watchdog is yet to comment on this development, the court dockets are yet to update on the appeals case and initial lawsuit by the regulator. However, Grewal clarified that the in-principle dismissal awaits approval by the SEC commissioners. Coinbase chief Brian Armstrong echoed Grewal’s statement, suggesting they expect approval this week.
The move to dismiss the lawsuit against Coinbase is essentially due to Trump’s pro-crypto stance. Besides signing the crypto executive order, Trump surrounds himself with advocates for digital assets, including David Sacks, Elon Musk, and SEC chair nominee Paul Atkins.
While Paul Atkins is set to head the SEC, Trump named pro-crypto Commissioner Mark Uyeda as acting chair. The latter is tasked with steering the agency away from the aggressive approach to regulation through enforcement under Gensler’s leadership.
Uyeda has settled quickly by unveiling a task force to formulate digital asset industry rules. Additionally, he has downsized and rebranded the crypto enforcement unit, suggesting a policy shift in the federal agency. Besides, the SEC paused litigation against crypto exchange Binance, portraying a new approach to crypto regulation.
SEC Crackdown Against Crypto Projects
Reflecting on the previous Biden administration, Gensler spearheaded enforcement actions brought against key industry players. The series of enforcements began following the sudden implosion of crypto exchange FTX in late 2022, with its then chief executive Sam Bankman-fried behind the $8 billion shortfall in the client funds.
Like Coinbase, other crypto exchanges, including Kraken, Gemini, and Binance, have suffered the wrath of enforcement actions for alleged contravention of securities laws. The enforcement escalated mid-2023 when the SEC filed cases against Binance and Coinbase.
The regulator alleged Brian Armstrong-led Coinbase offered unregistered securities, including Cardano and Solana. Also, the trading platform provided listing services without seeking approval from the SEC.
Coinbase opposed the SEC perspective and sought crypto-specific laws, while enforcement director Gurbir Grewal echoed Gensler’s stance that additional rules were unnecessary.
Crypto Lobby Paying Off
In the past years, the crypto industry has insisted that cryptocurrencies are unfit for the provisions of the decades-old financial law. Legal advisors consider the existing framework ambiguous, with judges splitting as they handle parallel cases involving crypto companies.
Coinbase has made several submissions before Judge Katherine Failla seeking dismissal of the lawsuit. The New York-based court denied the crypto exchange motion before rejecting the Major Questions doctrine to limit the SEC’s supervision. The latter argued that the doctrine should apply to the digital assets industry, citing its economic significance.
The setback at the District Court did not deter Coinbase from lodging an interlocutory appeal citing disagreement. Judge Failla granted the Coinbase request in January.
Beyond the corridors of justice, Coinbase chief teamed up with other executives, including Ripple boss Brad Garlinghouse. The team unveiled unprecedented influence to lobby politicians endorsing crypto. With over $130 million spent, the US has the most pro-crypto composition of lawmakers.
The crypto executives have sustained the momentum even after Trump’s victory, with Coinbase, Ripple, and Kraken donating $1M towards the inauguration fund. The meetings with the 47th president have paid off, and the SEC is now dropping the lawsuit a month after Gensler’s exit. Armstrong has credited the Trump administration as being behind the policy head and the reversal of restrictive enforcement deployed by the activist SEC chair.