SEC Poised to Vote on Coinbase Settlement, Potentially Shaping Crypto Regulation
The U.S. Securities and Exchange Commission (SEC) is preparing to cast a vote on a proposed settlement with Coinbase, which could lead to the complete withdrawal of the agency’s legal actions against the prominent crypto exchange. This development comes from insights shared by Coinbase’s Chief Legal Officer, Paul Grewal, indicating a significant shift in the regulatory landscape for digital assets.
As the SEC has been actively revising its stance on cryptocurrency, the anticipated vote represents a pivotal moment that could catalyze a wave of legal relief for other crypto firms also facing enforcement actions. Grewal highlighted that the agreement with the SEC staff is designed to dismiss the case “with prejudice,” meaning that the allegations of securities violations would be permanently halted. He stated, “It’s a great day for Coinbase, yes, but it’s also a great day for crypto in America.” He expressed confidence that the approval would be granted, leading to the formal dismissal of the case.
In simpler terms, Grewal noted, “We win; they lose.”
The SEC’s initial pursuit of Coinbase, the largest crypto platform based in the U.S., marked a significant warning to the broader industry. The agency accused Coinbase of violating federal regulations by failing to register as a clearing house, broker, or trading venue, based on its interpretation of the Howey test, which determines whether an asset qualifies as a security. Coinbase opted to contest these claims in federal court, resulting in a contentious legal battle. Recently, a judge sided with Coinbase, allowing the company to advance an appeal regarding a central question: Are the tokens being traded classified as securities under the SEC’s jurisdiction?
The crypto industry had anticipated a prolonged wait for judicial clarity, potentially extending to the U.S. Supreme Court, regarding former SEC Chair Gary Gensler’s assertion that the majority of tokens should be considered crypto securities. However, if the SEC concedes in this case, it could set a precedent influencing other ongoing cases and ultimately shift the legal landscape towards Congressional jurisdiction.
The SEC typically convenes enforcement meetings on Thursdays, and the final decision regarding the staff’s recommendation could take up to a week. With Acting Chairman Mark Uyeda, Republican Commissioner Hester Peirce, and Democrat Commissioner Caroline Crenshaw making up the current commission, it remains uncertain how the vote will unfold, especially given Crenshaw’s history of skepticism towards the digital assets sector.
Support Within the SEC
Uyeda and Peirce have exhibited a more favorable attitude toward the digital assets industry, acknowledging concerns regarding the SEC’s regulatory approach. Following Donald Trump’s inauguration, Uyeda assumed interim leadership at the SEC and began implementing a more lenient approach towards crypto regulation. If the vote is affirmative, this decision could be one of the most significant shifts in the SEC’s approach to cryptocurrency thus far.
Former Commissioner Paul Atkins is expected to take over following Senate confirmation, and both Uyeda and Peirce have previously served as counsels during his tenure at the SEC, suggesting continuity in the agency’s evolving stance on crypto regulation.
Earlier this week, the SEC announced a reorganization of its enforcement unit, broadening its focus from exclusively crypto-related cases to encompass a wider array of “emerging technologies.” This move indicates a potential retreat from the intense scrutiny previously directed at the crypto sector. Additionally, the SEC has withdrawn its appeal in an effort to enforce a broader definition of “dealer” activities under its regulations.
The Upcoming Vote
In the days ahead, legal professionals across the industry will be closely monitoring the SEC’s vote regarding Coinbase, as well as the judge’s ruling in the U.S. District Court for the Southern District of New York. Should the SEC officially retract its accusations against Coinbase for allegedly listing unregistered securities, similar cases may also be affected.
Grewal expressed hope that a dismissal of the case would serve as a template for resolving other legal disputes. He remarked, “If that were the case, we’d be delighted, because we felt that Gary Gensler’s entire campaign against crypto was a distortion — frankly, an abuse — of legal process.” As the SEC pivots towards resolving past actions, it has indicated a future focus on combating fraud rather than compliance disagreements.
As recently noted by Uyeda, the SEC’s new task force will guide enforcement efforts going forward. He stated, “One focus of this task force will be to ensure that we deploy enforcement resources judiciously.” Grewal acknowledged that the next priority will be advocating for clear federal regulations. Coinbase has been proactive in this arena, investing significantly in political efforts to influence the upcoming 2024 elections through the Fairshake PAC to foster a more favorable legislative environment.
Grewal highlighted that Congress has already expressed a commitment to introduce legislation within the first 100 days of the new session. “So we’re very eager, with this cloud now lifted, to focus our full attention on getting legislation passed on market structure and stablecoins. That is, frankly, long overdue.”
UPDATE (February 21, 2025, 13:11 UTC): Request for comment from the SEC is pending.
