Coinbase and the SEC Agree to End Enforcement Case, Signaling a Major Change in How the US Government Will Enforce the Crypto Market

This could signal a major change in how the US government will enforce the crypto market now that Trump is in office.

Coinbase Technologies Inc said on Tuesday that the U.S. Securities and Exchange Commission (SEC) has agreed to end an enforcement case that accused the cryptocurrency exchange of illegally running an unregistered securities exchange.

Coinbase shares rose 3% in premarket trading after the disclosure, which comes amid a broader effort by the Trump administration to scale back regulation of the crypto industry.

The SEC sued Coinbase in March 2023, alleging that seven of the digital assets that the exchange offered for trading were unregistered securities. Coinbase, the largest U.S. crypto exchange, has maintained that the tokens in question were not securities.

Coinbase had appealed the SEC lawsuit, and that appeal will be rendered moot if the SEC votes to dismiss the suit, which is expected to happen next week.

Coinbase said it will not pay any fines as part of the agreement to end the case, according to its co-founder and Chief Executive Officer Brian Armstrong.

“This agreement marks a huge day for Coinbase and for crypto,” Armstrong said on CNBC's "Squawk Box" on Tuesday. “It will cause a domino effect for the rest of the industry. This was the SEC trying to put crypto in a regulatory box that was designed for the prior generation of technology.”

Armstrong added that the original SEC suit was driven by “a small group of activists in this prior administration.”

The agreement to end the SEC case comes after Trump administration officials signaled plans to ease up on enforcement actions against crypto companies.

Earlier this month, the SEC began breaking up a special enforcement unit that was devoted to investigating crypto organizations, Reuters reported. The move is part of a broader effort by Trump officials to scale back regulation of the crypto industry.

Coinbase and its rivals spent millions of dollars throughout the last election cycle to help elect crypto-friendly lawmakers, and that investment now appears to be paying off.

Acting SEC Chairman Mark Uyeda recently said that the organization would now “deploy enforcement resources judiciously” when investigating crypto companies.

“A new task force will be moving away from the commission's previous approach toward the crypto market, which Uyeda said was 'unfair' to the industry,” the Journal reported.

Separately, Republican House and Senate lawmakers are working on legislation that would reclassify cryptocurrencies as commodities, The Wall Street Journal reported on Monday.

The change would likely hand oversight of crypto assets to the Commodity Futures Trading Commission (CFTC), which is a much smaller agency than the SEC.

The CFTC is actually smaller than ever right now, given that the Trump administration laid off a bunch of employees earlier this week.