SEC Set To Drop Coinbase Lawsuit, a ‘Hugely Vindicating’ Moment for the Crypto Industry

The potential dismissal would conclude an alleged securities law violation unleashed against the top American exchange in 2023

The U.S. Securities and Exchange Commission has agreed in principle to drop its lawsuit against Coinbase, pending approval from the agency’s commissioners.

The potential dismissal would conclude an alleged securities law violation unleashed against the top American exchange in 2023, representing one of the crypto industry’s most consequential legal wins against the regulator.

Coinbase CEO Brian Armstrong announced the development on Friday, revealing that the SEC will completely abandon its suit against the exchange.

“After years of litigation, millions of your taxpayer dollars spent, and irreparable harm done to the country, we reached an agreement with SEC staff to dismiss their litigation against Coinbase,” Armstrong stated in a statement.

The Coinbase boss indicated that the agreement was “hugely vindicating,” accusing the SEC of having used “mafia tactics” while launching its enforcement case against the exchange.

Armstrong asserted that the SEC was “wrong on the law,” and that its actions ‘could have killed the crypto industry in America.”

He stressed the significance of the decision, quipping:

“If this goes through, it's a really big deal, not just for us, but for the whole crypto industry. The 50 million Americans who hold crypto, and I think for the rest of the world because this is an important signal about where things are going.”

Coinbase Chief Legal Officer Paul Grewal noted that “there will be no settlement or compromise — a wrong will simply be made right.”

The SEC filed its lawsuit against Coinbase in June 2023, just two years after the company went public, alleging it knowingly operated an unregistered securities exchange for a decade. The lawsuit came as a shot across the bow of the cryptosphere. At the time, the suit arrived just days after the SEC lodged a similar case against Binance.

Coinbase opted to fight the allegations in federal court, and that legal fight has been intense, most recently seeing Judge Katherine Polk Failla grant Coinbase's request for an interlocutory appeal.

The potential dismissal would shift attention from courts to Congress for formulating rules for the road for the crypto industry.

Notably, the SEC recently asked to pause the Binance enforcement wrangle for 60 days. If the SEC formally backs off the accusations Coinbase improperly listed unregistered securities, it'll have to do the same in other similar cases.

As ZyCrypto recently reported, ex-SEC official John Reed Stark foreshadowed that the SEC's appeal against Ripple will be dropped “expeditiously highly favorable terms”.