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The US Securities and Exchange Commission (SEC) is undergoing a paradigm shift in its approach to crypto enforcement under President Trump, as the agency looks set to drop key cases against several industry leaders.
Last week, Coinbase CEO Brian Armstrong announced that the company has reached an agreement with the SEC to drop the unregistered securities charges that it filed against the exchange in 2023.
Armstrong said the agreement will result in a complete victory for Coinbase, with no fines to be paid and no changes to be made to the company’s business model.
He did, however, note that Coinbase has spent more than $50m on defending itself against the SEC’s “false” charges.
“Growing up, I had a naive view that regulators exist to hold companies accountable,” said Armstrong.
“What I realized in this ordeal is that, sometimes, companies must hold regulators accountable who are painting outside the bounds of the law, to preserve freedom.
“Accountability can actually happen both ways.”
In June 2023, the SEC alleged that Coinbase has operated as an unregistered securities exchange, brokerage and clearing agency since at least 2019.
In the original complaint, the SEC singled out 13 assets offered by Coinbase that it deemed “securities” under the Securities Exchange Act of 1934
These were SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH and NEXO.
In addition, the SEC charged Coinbase for the unregistered offer and sale of securities in connection with its staking-as-a-service programme.
Prior to Coinbase’s listing on the Nasdaq in 2021, Armstrong claims the SEC reviewed Coinbase’s listing standards “in depth” and did not find them to be in violation of securities laws.
He therefore argues that Coinbase was entrapped by the SEC after it gave the green light for the company to go public.
“The SEC made it clear to us that the only way to avoid litigation was to delist the many assets they falsely claimed were securities,” he said.
“It was a bullying tactic, pure and simple. If we had caved, it would have dramatically limited the scope of which crypto assets were allowed in the US, and pushed the industry further offshore, into the shadows.”
Going forward, Armstrong said the US crypto industry should not settle merely for the charges being dropped.
Without “clear rules of the road”, a future SEC may “exceed its Congressional authority” to target the crypto industry once again, he said.
The Coinbase CEO therefore hopes to see a bipartisan market structure bill passed by Congress that will clarify crypto’s relation to securities laws.
During the 2024 election season, Coinbase donated $95m to political campaigns and causes — more than any other company in the US.
It is likely hoping that the favour will be repaid in friendly legislation.
SEC v Binance — stayed for 60 days
Another significant case to watch in the US is the SEC’s action against Binance — another holdover from the previous administration.
In June 2023, the SEC filed 13 charges against Binance and then-CEO Changpeng Zhao, alleging that Binance had operated as an unregistered securities exchange, brokerage and clearing agency since at least 2017.
Like Coinbase, Binance was also hit with a specific charge for its offer and sale of yield-bearing products and staking services.
But unlike Coinbase, the SEC filed additional charges against Binance for misleading investors as to the safety of its US platform, and for allowing non-US investors to access it illegally.
Earlier this month, the SEC filed what one former litigator has described as an "extraordinary" two-page motion, asking a DC judge to pause the Binance case while the agency rethinks its approach to crypto enforcement.
Referring to the work of its new Crypto Task Force, the SEC said that it is developing a new crypto framework that may “impact and facilitate” a potential resolution of the case.
The agency proposed that the case be stayed, which the defendants agreed to.
Like Coinbase, Binance now appears likely to escape the unregistered securities charges.
This is a remarkable twist, given that the SEC had previously obtained records of Binance’s former chief compliance officer admitting to a colleague that “we are operating as a fking unlicensed securities exchange in the USA bro”.
SEC v Justin Sun — stayed for 60 days
The SEC has also agreed to stay its case against Chinese crypto entrepreneur Justin Sun for 60 days.
In 2023, Sun and several of his companies were charged with fraud for illegally touting crypto-asset securities to US investors.
The SEC also named eight US celebrities in its complaint, including actress Lindsay Lohan and singer Akon, for helping to fraudulently promote Sun’s tokens.
Sun has since emerged as a key ally of President Trump, after investing $75m in the Trump family’s crypto company, World Liberty Financial. This made him the largest investor in the project.
Other cases dropped
In the past week, the SEC has also dropped its investigations into UniSwap Labs and OpenSea.
UniSwap is a decentralised exchange that allows users to trade crypto-assets with one another directly, while OpenSea offers the same service for non-fungible tokens (NFTs).
The SEC was investigating both platforms over their potential failure to register as securities exchanges, brokerages and clearing agencies.
UniSwap said the SEC’s decision is a ”huge win” for decentralised finance (DeFi) and reaffirms that its underlying technology, including immutable smart contracts, are “on the right side of the law”.
Devin Finzer, founder and CEO of OpenSea, said the SEC’s dropping of its investigation is a win for all developers who are using blockchain to create and build new products and services.
“Trying to classify NFTs as securities would have been a step backward — one that misinterprets the law and slows innovation,” he said.
