The Securities and Exchange Commission has agreed to drop its enforcement case against Coinbase, the largest U.S.-based cryptocurrency exchange, in a move that signals a major shift in regulatory policy under the Trump administration. The decision, which is pending final approval from SEC commissioners, follows intense scrutiny of the agency's handling of crypto regulations during the Biden administration.
The SEC initially sued Coinbase in 2023, accusing the company of operating as an unregistered securities exchange and failing to properly register its crypto staking program. However, the case, which was initiated under former SEC Chair Gary Gensler, is now being reversed under President Donald Trump's administration, which has adopted a significantly more crypto-friendly stance.
Coinbase co-founder and CEO Brian Armstrong hailed the decision as a victory for the industry. "I think it's a really important signal that, [after] a small group of activists in this prior administration who tried to unlawfully attack this industry, we're going to be able to turn the page on that and finally get some regulatory clarity in America," Armstrong said in an interview on CNBC's Squawk Box Friday morning.
He added, "I hope that they'll dismiss all the bogus cases, frankly, and it will be a domino effect for the rest of the industry." Coinbase also issued a press release titled "Righting a Major Wrong," framing the SEC's decision as a long-overdue correction.
A representative for the SEC declined to comment on Coinbase's announcement.
Shares of Coinbase initially surged in premarket trading following the news, though the stock remained relatively flat by midday. Bitcoin prices also climbed about 1% in response, reflecting optimism among crypto investors about the administration's regulatory pivot.
The SEC's case against Coinbase was part of a broader crackdown on cryptocurrency firms during the Biden administration, which saw regulators take aggressive action against major exchanges, including Binance and Kraken. The lawsuits accused these platforms of circumventing securities laws, depriving investors of essential protections. The cases against Binance and Kraken remain active, though it is unclear whether the SEC will take a similar approach and drop those suits as well.
The move comes as Trump positions himself as a strong advocate for cryptocurrency. During his campaign, he pledged to make the U.S. the "crypto capital of the world" and has since followed through by reversing previous enforcement actions. In January, he signed an executive order creating a working group tasked with developing a comprehensive regulatory framework for digital assets.
Crypto markets responded positively to Trump's election victory, with Bitcoin surpassing the $100,000 threshold for the first time in history. The administration's pro-crypto stance has also fueled speculation in so-called "meme coins," including a Trump-branded token that gained traction before his inauguration.
The SEC's decision to abandon its case against Coinbase marks a significant departure from its previous stance. Under Gensler, the agency argued that many crypto assets met the legal definition of securities and were subject to existing regulations, requiring exchanges like Coinbase to register with the agency. However, crypto companies pushed back, arguing that the SEC failed to provide a clear regulatory framework, making compliance nearly impossible.
Armstrong has been an outspoken critic of the SEC's regulatory approach, repeatedly clashing with Gensler over what he described as inconsistent and arbitrary enforcement. On Friday, Armstrong took to social media to reiterate his frustration with the agency's past actions. "We tried to 'come in and register,' but it turned out it was a fake offer, as every crypto company discovered," he wrote on X (formerly Twitter). "Regulators are supposed to enforce the law, but they can't make up new laws on the spot if they don't like the current ones, or weaponize a lack of clarity in the law."
The SEC's lawsuit against Coinbase alleged that the company's operations violated securities laws by offering trading services for digital assets that the agency classified as securities. The complaint also accused Coinbase of depriving investors of essential protections, such as rules preventing fraud and manipulation, proper disclosure requirements, and safeguards against conflicts of interest.
"You simply can't ignore the rules because you don't like them or because you'd prefer different ones: the consequences for the investing public are far too great," Gurbir S. Grewal, director of the SEC's Division of Enforcement, said at the time the lawsuit was filed.
