In a significant development for the cryptocurrency industry, Coinbase announced on Friday, February 21, 2025, that the Securities and Exchange Commission (SEC) has agreed in principle to dismiss its lawsuit against the leading U.S. crypto exchange. This marks a dramatic reversal in the regulatory approach to cryptocurrencies under President Donald Trump’s second administration.
The Announcement
“SEC staff has agreed in principle to dismiss its unlawful enforcement case against Coinbase, subject to Commissioner approval—righting a major wrong,” declared Paul Grewal, Coinbase’s Chief Legal Officer, in a company blog post. CEO Brian Armstrong indicated that final approval from SEC commissioners is expected next week.
This potential dismissal represents a major victory not just for Coinbase but for the entire cryptocurrency sector, which has faced significant regulatory challenges in recent years.
 Background: The SEC’s Crypto Crackdown
The lawsuit against Coinbase was part of a broader enforcement campaign initiated under former SEC Chairman Gary Gensler. Following the catastrophic collapse of FTX in November 2022, which resulted in an $8 billion shortfall in customer funds, Gensler intensified regulatory scrutiny of the crypto industry.
The SEC’s legal action against Coinbase, filed in June 2023, alleged that the exchange had listed several cryptocurrencies—including Solana and Cardano—that qualified as securities under U.S. law. According to the SEC’s argument, because Coinbase had not registered these assets as securities or received appropriate regulatory approval, the company was in violation of securities laws.
At the time, Gurbir S. Grewal, director of the SEC’s enforcement division, emphasized: “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.”
Coinbase’s Legal Battle
Coinbase vigorously contested the SEC’s claims, arguing that cryptocurrencies represented an entirely new asset class that didn’t fit neatly within the framework of decades-old securities laws. The company maintained that the SEC’s approach lacked clarity and that the industry needed specific regulatory guidelines tailored to digital assets.
The case was assigned to Judge Katherine Failla in the Southern District of New York. In a March 2024 ruling, Judge Failla largely denied Coinbase’s motion to dismiss, rejecting the company’s arguments about lack of fair notice and the applicability of the “Major Questions doctrine,” which limits agency authority on issues of significant economic and political importance.
Despite this initial setback, Coinbase requested an interlocutory appeal—a procedure that would move the case to the appeals court before a final district court decision. Judge Failla granted this request last month, setting the stage for what would have been a prolonged legal battle with potentially industry-defining consequences.
 The Political Landscape Shift
The likely dismissal of the SEC’s case against Coinbase comes amid a dramatic shift in the political approach to cryptocurrency regulation. Since taking office for his second term, President Trump has positioned himself as pro-cryptocurrency, implementing several significant policy changes:
– Appointing a dedicated AI and cryptocurrency czar
– Issuing an executive order favorable to the crypto industry
– Nominating Paul Atkins, known for his pro-crypto stance, to head the SEC
– Launching his own memecoin
Under Acting SEC Chair Mark Uyeda, the Commission has pivoted away from Gensler’s aggressive enforcement strategy toward a more collaborative approach. Uyeda has established a new task force focused on developing updated rules for the cryptocurrency industry and has scaled back the SEC’s crypto enforcement unit.
This regulatory pivot also includes pausing litigation against Binance, the world’s largest cryptocurrency exchange, citing the agency’s evolving approach to crypto regulation.
 The Crypto Industry’s Influence Campaign
Coinbase’s victory didn’t come through legal arguments alone. The cryptocurrency industry, led by figures like Brian Armstrong and Ripple CEO Brad Garlinghouse, mounted a massive influence campaign aimed at shifting the political landscape in favor of crypto.
According to data compiled by crypto researcher Molly White, the industry invested more than $130 million in the 2024 elections to support pro-crypto candidates at various levels of government. Following Trump’s election victory, Armstrong met privately with the president-elect, and several major crypto companies—including Coinbase, Kraken, and Ripple—each contributed $1 million to Trump’s inauguration fund.
Armstrong explicitly acknowledged the political dimension of this regulatory victory: “I have to give credit here to the Trump administration, for winning the election, and for the departure of the activist head of the SEC, Gary Gensler.”
 Implications for the Crypto Industry
The SEC’s decision to drop its case against Coinbase signals a major shift in the regulatory environment for cryptocurrencies in the United States. This development is likely to have several important implications:
1. Regulatory Clarity: The dismissal may lead to clearer guidelines for cryptocurrency classification, addressing the industry’s long-standing complaints about regulatory uncertainty.
2. Market Confidence: The decision could bolster investor confidence in the U.S. crypto market, potentially leading to increased institutional investment.
3. Industry Expansion: With reduced regulatory pressure, cryptocurrency exchanges and other service providers may feel more comfortable expanding their offerings within the United States.
4.Legislative Action: The executive branch’s shift may encourage Congress to take up comprehensive cryptocurrency legislation, providing a more stable regulatory framework.
While the in-principle agreement to dismiss the case represents a significant milestone, several steps remain before this becomes official:
– SEC commissioners must formally approve the dismissal
– Court dockets for both the original lawsuit and Coinbase’s appeal will need to be updated
– The specific terms of the dismissal have yet to be disclosed
Industry observers will be watching closely to see whether this development marks the beginning of a broader regulatory realignment for cryptocurrencies in the United States, or if it represents a more limited policy adjustment focused specifically on Coinbase.
Check Crypto news today for latest update on the cryptocurrency industry ,claim a substantial victory in its ongoing effort to secure a regulatory environment that acknowledges the unique nature of digital assets while providing appropriate consumer protections.
