SEC Moves to Dismiss Lawsuit Against Coinbase

The U.S. Securities and Exchange Commission is set to drop its lawsuit against Coinbase, according to an announcement from the exchange on February 21. The decision, pending final approval from SEC commissioners, marks a potential turning point in the agency’s stance on crypto regulation.

Coinbase CEO Brian Armstrong called it a “huge day” for the crypto industry. He confirmed that the company will not pay any fines as part of the dismissal.

SEC Lawsuit Alleged Unregistered Securities Violations

The SEC filed charges against Coinbase in June 2023. It accused the exchange of offering unregistered securities and operating illegally as a broker, clearinghouse, and exchange. The case was part of a broader crackdown on crypto under former SEC Chair Gary Gensler.

However, expectations of a regulatory shift have grown under President Donald Trump’s administration. Paul Atkins, the current nominee for SEC chair, is expected to take a more industry-friendly approach.

Armstrong criticized past regulatory actions. “A small group of activists in this prior administration tried to unlawfully attack this industry,” he said in an interview with CNBC. “We’re going to be able to turn the page on that and finally get some regulatory clarity in America.”

Analysts See a Positive Impact on Coinbase’s Business

Analysts at H.C. Wainwright & Co. called the expected lawsuit dismissal a “major win” for both Coinbase and the broader crypto industry. They noted that it could lift a significant regulatory burden and reduce legal costs.

The analysts also predicted business expansion. “We would expect the dismissal of Coinbase’s case to eventually lead to an expansion of the company’s staking business,” they wrote. They also anticipate an increase in new token listings, which could boost Coinbase’s transaction and subscription revenues.

Market Reaction and Future Outlook

Despite the positive news, Coinbase’s stock did not see sustained gains. It opened about 1% higher on Friday but later fell, closing at $235.37, down 8.2%. A major hack at Bybit contributed to broader market uncertainty.

Crypto markets have reacted strongly to political developments in recent months. Bitcoin surged past $100,000 following Trump’s election. Meme coins also saw increased activity, including a Trump-themed token promoted before his inauguration.

With the SEC potentially shifting its stance, Coinbase and other exchanges may see clearer regulatory guidelines in the coming months. However, industry participants will be watching closely to see how new leadership at the SEC approaches crypto policy.