In a significant shift for the cryptocurrency industry, the U.S. Securities and Exchange Commission (SEC) has agreed in principle to dismiss its lawsuit against Coinbase, marking a major reversal in the high-profile legal battle between the regulator and the country’s largest crypto exchange. The decision underscores a changing regulatory landscape and signals potential relief for the broader digital asset sector.
Coinbase announced that SEC staff had agreed to drop the case, pending formal approval from the agency’s commissioners. “This is a victory not just for Coinbase, but for our customers, the United States, and individual freedom,” the company stated, emphasizing that the lawsuit should never have been filed in the first place.
The SEC originally sued Coinbase in June 2023, two years after the exchange went public, accusing it of violating U.S. securities laws. Coinbase has long argued that the case was politically motivated, blaming former SEC Chair Gary Gensler’s leadership for what it described as an unlawful enforcement action. “In its war against crypto, the SEC acted as if it was above the law, usurping the power of Congress as set forth in the Constitution,” Coinbase asserted. “After millions in legal costs, countless employee hours, and years of protracted litigation, we have successfully protected our customers’ rights and held the SEC accountable.”
The decision to drop the case comes in the wake of Gensler’s resignation in January, following President Donald Trump’s return to office. Under the new administration, the SEC is undergoing a pro-crypto policy shift, with former regulator Paul Atkins set to take over as SEC Chair, pending Senate confirmation. Coinbase welcomed the agency’s shift in direction and expressed optimism about collaborating with new leadership to establish clear regulatory guidelines for the industry.
However, Coinbase still faces other legal challenges. Earlier this month, a U.S. a federal judge determined that Coinbase must respond to an investor lawsuit in New York, dismissing its claim that it falls outside the definition of a statutory seller under federal regulations. The ruling means Coinbase will need to defend itself against allegations that it sold unregistered securities.
According to a Reuters report, U.S. District Judge Paul Engelmayer determined that Coinbase transacted directly with its customers, indicating that it functioned as a seller. The lawsuit claims that the exchange offered and sold 79 cryptocurrencies classified as securities without registering as a broker-dealer. In response, Coinbase petitioned a U.S. appeals court in January 2025, arguing that cryptocurrency transactions should not be classified as securities trades but rather as simple asset sales.
Beyond its legal battle with the SEC, Coinbase has also taken action against the Federal Deposit Insurance Corporation (FDIC), accusing the agency of attempting to “cut off digital-asset firms from essential banking services.” The exchange claims that both the SEC and FDIC have failed to comply with Freedom of Information Act (FOIA) requests, further fueling tensions between regulators and the crypto industry.
As the largest U.S. cryptocurrency exchange by trading volume, Coinbase plays a crucial role in the market and serves as the primary custodian for the recently approved spot Bitcoin ETFs. The SEC’s decision to drop its lawsuit may serve as a turning point, setting the stage for a more constructive relationship between regulators and the digital asset industry.
By Alejandro Silva Ramírez, Crypto Analyst & Columnist