Coinbase relieved as US SEC drops its 2023 regulatory lawsuit

The United States Securities and Exchange Commission (SEC) has agreed to drop a regulatory lawsuit against Coinbase. The commission in 2023 charged the New York-based cryptocurrency exchange platform for operating as an unregistered securities broker. 

Confirming the development, Coinbase said the dismissal is still pending final approval by an SEC commissioner before it is officially withdrawn. Also stating the impact of the lawsuit dismissal, Coinbase CEO Brian Armstrong noted that the move will not only be a win for the company but for the entire crypto world. 

“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,” he said. 

The development also follows a series of crypto policy enhancements by the U.S. President, Donald Trump. 

At a Bitcoin conference in Nashville, Donald Trump declared that he would make the United States the crypto capital of the world. Alongside, he pointed out the possibility of establishing a crypto reserve to cover the United States’ $36 trillion debt. 

His promise to make the US “the world capital of crypto” saw him accumulate millions of dollars in funding from top crypto industry executives. This led to his appointment of Elon Musk as a co-leader of the Department for Government Efficiency (“DOGE”), a role aimed at creating a more efficient government, slashing excess regulations, cutting wasteful expenditures, and restructuring Federal agencies.

Trump’s meme coin, $TRUMP, skyrocketed in valuation by over 300 per cent in valuation in less than 24 hours after its launch. A day before his inauguration, $TRUMP hit a market cap of $5.81 billion, marking his full entry into digital assets and merchandise sales.

Notably, his media company, Trump Media and Technology Group (TMTG) is also planning to launch three exchange-traded funds (ETFs) currencies.

The President also nominated Paul Atkins as the new chair of the Securities and Exchange Commission (SEC) after Gary Gensler, who left the agency when Trump was inaugurated in January, resigned.

Also Read: #Pcoin: Pi network launches officially, opens trading to CEX.

SEC lawsuit against Coinbase

Back in June 2023, the regulator sued Coinbase which also saw a rollout of charges against the crypto industry by attempting to frame many firms and projects as either unregistered securities brokers or securities. This placed heavy regulatory and financial pressure on the industry.

The SEC lawsuit alleged that the centralized exchange firm has never registered as a broker, national securities exchange, or clearing agency, thereby evading the disclosure scheme for securities markets. 

SEC added that several tokens offered by the crypto exchange, including Solana, Cardano, Polygon, Filecoin, The Sandbox, Axie Infinity Chiliz (CHZ), Flow (FLOW), Internet Computer, Near, Voyager Token (VGX), Dash and Nexo qualify as securities. The lawsuit further alleged that the platform has operated as an unregistered security broker since 2019, almost two years before its initial public offering in April 2021.

Also, the regulator claimed that Coinbase’s staking program includes five stackable crypto assets, making the staking program an investment contract and, therefore, a security. However, Coinbase argued that its staking products do not qualify as securities. 

Gary Gensler, who was SEC Chair at that time, said the crypto exchange allegedly deprived its customers of critical protections that prevent fraud and manipulation and avoided proper disclosure and safeguards against conflicts of interest.

“As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them,” said Gurbir Grewal, director of the SEC’s Division of Enforcement.

During that time, the SEC also sued Binance for violating securities law and mishandling customers’ funds as the crypto exchange was charged with 13 counts of violations under various securities laws. 

Also recall that following the sudden crash of the naira currency in May 2023, the Federal Government of Nigeria accused Binance of disrupting the currency. As a result, the Economic and Financial Crimes Commission (EFCC) and FIRS separately sued Binance over alleged tax evasion, money laundering, and foreign exchange violations.

In a recent development, the Federal Inland Revenue Service (FIRS) placed a request to the Federal High Court in Abuja to order the cryptocurrency exchange platform, Binance, to pay $79,514,055,594.40 and N231 million for economic losses allegedly caused by its operations in Nigeria. It also requested a $2,001,000,000 penalty for tax evasion during 2022 and 2023.

The tax agency had begun Binance’s trial in an alleged tax evasion case where the platform was accused of offering services such as cryptocurrency transactions and the remittance and transfer of those assets to Nigerians while failing to deduct the necessary VAT from those operations.