The US Securities and Exchange Commission (SEC) has decided to drop its lawsuit against Coinbase, a leading centralized exchange, that had accused the company of operating as an unregistered securities broker. This decision is seen as a significant development, not only for Coinbase but also for the broader cryptocurrency ecosystem.
SEC’s Legal Challenge Against Coinbase
The SEC filed the lawsuit in June 2023 as part of its wider crackdown on crypto firms and projects, asserting that many digital assets and companies were operating as unregistered securities brokers. Specifically, the SEC accused Coinbase of failing to register its staking services with the regulator. Several major cryptocurrencies, including Solana, Cardano’s ADA, Filecoin, and Polygon, were also named as “unregistered securities” in the lawsuit.
Coinbase’s Response
Coinbase quickly rejected the SEC’s allegations, claiming that the suit represented regulatory overreach. The company pointed out that the SEC had approved its public listing on US stock exchanges in 2021, which seemed contradictory to the later legal actions. In addition, Coinbase launched a political pressure campaign, collaborating with Ripple and other industry players to lobby for more favorable regulations.
To further bolster its position, Coinbase contributed millions of dollars to Fairshake, a political action committee (PAC) that educates the public on crypto regulations and lobbies for industry-friendly policies. The exchange also supported the Stand With Crypto advocacy group, which aims to inform voters about pro-crypto lawmakers and key regulatory policies.
“Crypto voters won’t be taken seriously until we send a clear message to political candidates that it is bad politics to be anti-crypto,” said Coinbase CEO Brian Armstrong in June 2024.
Coinbase’s efforts to influence the political landscape appear to have made an impact, with the 2024 US elections being shaped by razor-thin margins. Experts, like Tonya M. Evans, a professor at Pennsylvania State University, have suggested that these advocacy initiatives helped sway the outcome, particularly in close races.
What’s Next for Coinbase?
The dismissal of the lawsuit is not yet final, as it still requires approval from an SEC commissioner before it can be officially withdrawn. However, if approved, this could mark a significant turning point for the crypto industry, sending a positive signal to the millions of crypto holders in the US and beyond.
Coinbase CEO Brian Armstrong expressed optimism about the potential impact: “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.”
