Coinbase case dropped by US regulator as it adopts crypto-friendly course

Lawsuit launched by former SEC chairman alleged exchange company allowed trade of crypto tokens that were unregistered securities

The Coinbase logo in Times Square, New York. Reuters

A US securities regulator on Thursday dismissed its lawsuit against Coinbase, the largest cryptocurrency exchange in the US, as President Donald Trump's administration changes Washington's stance towards cryptocurrencies.

The US Securities and Exchanges Commission sued Coinbase in 2023, alleging that it evaded regulations by allowing users to trade crypto tokens that were unregistered securities. The lawsuit was instigated by former SEC chairman Gary Gensler, who became one of the industry's greatest antagonists during his tenure.

One of the major sticking points in the case was whether some crypto assets should be classified as securities.

“I did not support the action against Coinbase. Among other things, I was concerned that it was part of the Commission’s larger strategy to use its enforcement tool to regulate the crypto industry,” SEC Commissioner Hester Peirce said in a statement.

Coinbase last week said it expected the SEC to drop its enforcement case, “righting a major wrong”, Coinbase chief legal officer Paul Grewal wrote in a February 21 blog post.

Mr Grewal at the time called for politicians to pass legislation that would bring “long-term certainty” that would help the US to lead in the crypto industry.

“Clarity will bring new inflows of capital into the US, update our financial system so consumers pay lower fees, and help create economic freedom for all,” he said.

The crypto industry had been anticipating a lighter regulatory touch after Mr Trump's 2024 electoral victory. Since his inauguration on January 20, the SEC has made a number of pro-crypto moves including establishing a “crypto task force”, replacing its Crypto Assets and Cyber Unit with a smaller team, and revisiting certain cases.

This month, a federal judge in Washington paused the SEC's lawsuit against Binance after a joint request, citing the establishment of the crypto task force.

The moves were made before the confirmation of Mr Trump's nominee to lead the agency, Paul Atkins, whose consulting firm has clients in the crypto industry.