Coinbase Case Dropped by U.S. SEC as Agency Reverses Crypto Stance

Coinbase has been freed from its protracted legal battle with the U.S. Securities and Exchange Commission as the agency agreed to drop the case that's been among the industry's core fights in federal court.

Though the SEC's intention to agree to shut down the legal dispute had already gone public when the U.S. crypto exchange announced the deal last week, the commissioners had to cast a formal vote to ask a federal judge to throw the switch. The dismissal — opposed by the commission's sole Democrat, Caroline Crenshaw — was done in such a way that the regulator can't change its mind later.

"It’s time for the commission to rectify its approach and develop crypto policy in a more transparent manner," SEC Acting Chair Mark Uyeda said in a statement. SEC lawyers already filed a motion to dismiss the case.

Dropping this main case doesn't free the SEC from other Coinbase legal matters, including the company's petition to force the agency to establish crypto rules and Coinbase's pursuit of internal documents in the exchange's ongoing work to reveal the regulator's private deliberations on how to approach digital assets.

But this enforcement case was the top legal concern for the U.S. public company, and it sought to elevate the central legal questions of what makes a crypto security and when (and how) a digital assets exchange should register with the agency. Those fundamental questions still await answers that must now be provided by the U.S. Congress.

Once the SEC's previous leadership departed — especially the crypto skeptic chair, Gary Gensler — the temporary chair elevated by President Donald Trump, Mark Uyeda, began overhauling the agency's legal officials and its stance on digital assets. Uyeda named fellow Republican Commissioner Hester Peirce to run the agency's crypto task force, and both of them were vocal critics of the way Gensler approached the industry.

The digital assets sector didn't have to wait for the confirmation of Paul Atkins, Trump's pick to permanently run the agency. Both Uyeda and Peirce served as his counsels when he was a commissioner at the SEC, so they're widely expected to be on a course he'll maintain. So far, that course has seen a wave of abandoned crypto investigations and dropped cases, including against Robinhood, Gemini and ConsenSys's MetaMask, and pauses of matters involving Tron and Binance.

The regulator is no longer maintaining the interpretation of the U.S. Supreme Court's so-called Howey test that it said had indicated many crypto projects qualified as securities.

"Goodbye," Chief Legal Officer Paul Grewal posted on social-media site X after the SEC's announcement on Thursday. "And good riddance."

But Commissioner Crenshaw argued the wholesale withdrawals and dismissals of such cases undermines the authority of the enforcement division, suggesting it's "politicized" and serves at the whim of each new administration.

"Whatever the law may be tomorrow, market participants should not be able to avoid the law as it stands today," Crenshaw said in her statement. "Today’s action creates more uncertainty. What exactly is the law as it applies to crypto assets? How can we pursue fraudulent conduct in this space while casting doubt on our regulatory jurisdiction?"

The SEC's changed view on Coinbase, which CoinDesk was first to report on last week, will cause the exchange to shift its Washington focus toward Congress and legislation, Grewal told CoinDesk in a previous interview. The company is among the digital assets businesses that led the creation and deployment of the Fairshake PAC in the 2004 elections, collectively devoting more than $160 million to an effort to elect crypto-friendly candidates to office. Now Coinbase is seeking to get a return on that investment with regulations that it considers favorable.

The Fairshake PAC, which shook up the campaign-finance world with its outsized corporate spending levels, is still at it, dabbling in special elections as it prepares for the 2026 cycle.

Read More: SEC Poised to Drop Coinbase Lawsuit, Marking Big Moment for U.S. Crypto

UPDATE (February 27, 2025, 23:08 UTC): Adds comment from Coinbase executive Paul Grewal.

UPDATE (February 2, 2025, 19:35 UTC): Adds comment from SEC Commissioner Caroline Crenshaw.