The U.S. Securities and Exchange Commission (SEC) has agreed in principle to dismiss its high profile enforcement case against Coinbase, the largest cryptocurrency exchange in the United States, pending approval from the agency’s commissioners as reported by Fox journalist, Eleanor Terrett.
This unexpected development, announced by Coinbase on February 21, 2025, signals a reversal in the SEC’s regulatory approach to digital assets under new leadership appointed by President Donald Trump.
If finalized, the dismissal would conclude a nearly two-year legal battle that began in June 2023, when the SEC accused Coinbase of operating as unregistered securities exchange, broker, and clearing agency.
Background and Legal Context of the Case Against Coinbase
The SEC’s original complaint alleged that Coinbase carried out trading of unregistered securities through its platform and offered an unregistered staking-as-a service program. The agency argued that Coinbase’s business model violated federal securities laws by blending exchange, brokerage, and custodial services without proper oversight.
Coinbase went against these claims and asserted that its operations complied with the existing regulations and that the SEC had approved its business model during the company’s 2021 public listing process.
The case took a critical turn in January 2025 when the Southern District of New York granted Coinbase’s request for an interlocutory appeal to the Second Circuit Court which challenged SEC’s application of the Howey Test to crypto assets. This victory set the stage for the SEC’s decision to abandon the litigation entirely.
Political Winds and Regulatory Implications
The dismissal of this case is followed by major shifts in the SEC’s leadership. Former Chair Gary Gensler, who resigned in January 2025, is known for starting a war against crypto during his tenure at the SEC. His successor on the other hand, Paul Atkins, who has a pro-crypto stance, has signaled a more collaborative approach towards digital assets.
This is in line with Trump administration’s broader push to establish clearer cryptocurrency regulations, including its recent efforts to pause similar cases like the SEC’s lawsuit against Binance.
Market Reaction and Industry Impact
News of dismissal of the case led to a sharp increase of 4.5% in Coinbase’s share price, indicating increased investor optimism about reduced regulatory headwinds.
Ripple’s Ongoing Legal Battle with the SEC
The ongoing SEC case against Ripple Labs which centers around classification of XRP as a security, remains in a critical phase. Following a favorable ruling for Ripple in August 2023, the SEC has since filed an appeal, arguing that XRP should be deemed a security under U.S. law. Ripple is supposed to respond to this appeal by April 16, 2025.
While there is speculation about whether the SEC might want to drop the case in light with recent developments within the SEC but the outcome remains uncertain. The legal battle continues to capture attention of the community, as it could set significant milestone for the industry’s regulatory landscape.
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