SEC Dismisses Lawsuit Against Coinbase, Promises Regulatory Framework for Crypto

The Securities and Exchange Commission (SEC) said Thursday (Feb. 27) that it dismissed its pending civil enforcement action against cryptocurrency exchange Coinbase.

The SEC said in a press release that it made this move as part of its effort to reform its regulatory approach to the crypto industry, which includes its formation of a Crypto Task Force that will help develop a regulatory framework for crypto assets.

“For the last several years, the Commission’s views on crypto have been largely expressed through enforcement actions without engaging the general public,” SEC Acting Chairman Mark T. Uyeda said in the release. “It’s time for the Commission to rectify its approach and develop crypto policy in a more transparent manner. The Crypto Task Force is designed to do just that.”

Coinbase said in a Thursday post on X: “It’s official: case dismissed. Time for fair legislation for the entire industry.”

Coinbase Chief Legal Officer Paul Grewal reposted the company’s post, commenting: “Goodbye. And good riddance.”

In another post on X, Grewal said: “We thank the new leadership and staff at @SECGov. Common sense once again is not so common.”

Both Grewal and Coinbase Co-founder and CEO Brian Armstrong said Feb. 21 that they had been told by SEC staff that they could expect the Commission to dismiss the lawsuit.

Grewal wrote in a Feb. 21 blog post: “We’ve always maintained that we were right on the facts and the law, and today’s announcement confirms that this case should never have been filed in the first place.”

The SEC sued Coinbase in June 2023, alleging that the crypto exchange violated securities laws. It argued that Coinbase’s business “intertwines the traditional services of an exchange, broker, and clearing agency” without registering those functions with the SEC, as the law requires.

Grewal said in his Feb. 21 blog post that the SEC reviewed Coinbase’s business model and S1 disclosures and allowed the company to go public in April 2021, but then sued the company two years later, “despite absolutely nothing changing in our business model.”

The SEC said in its Thursday press release that its decision to drop the action against Coinbase does not reflect its position on any other case and that its Cyber and Emerging Technologies Unit will investigate fraud involving blockchain technology and crypto assets.