The Securities and Exchange Commission has agreed to drop its lawsuit against Coinbase, ending a legal battle that began in June 2023 and threatened to fundamentally alter how crypto operates in the United States. The case, which accused Coinbase of running an unregistered securities exchange, was arguably the most consequential regulatory action the crypto industry has ever faced.

On February 21, 2025, Coinbase announced that SEC staff had agreed in principle to dismiss the case with prejudice. That last part matters. “With prejudice” means the SEC can’t refile the same claims later, which is the legal equivalent of burning the bridge behind you.

What the SEC originally wanted

Back in June 2023, the SEC filed suit alleging Coinbase was operating as an unregistered exchange, broker, and clearing agency. The commission also claimed the platform was listing unregistered securities, specifically naming tokens including SOL, ADA, MATIC, FIL, SAND, AXS, NEAR, and DASH.

Coinbase chose to fight rather than settle. CEO Brian Armstrong described the decision to litigate as essential to prevent lasting harm to the US crypto industry. Coinbase had already been petitioning the SEC for clearer regulatory guidance, arguing the commission was overstepping its authority on digital assets. The lawsuit became the venue where that argument would actually get tested.

Why the SEC blinked

The dismissal didn’t happen in a vacuum. Former SEC Chair Gary Gensler, who oversaw the aggressive enforcement-first approach to crypto regulation, departed in January 2025. His exit coincided with a broader political shift toward a more crypto-friendly regulatory posture following the election of a new administration.

The new SEC has taken a different tack. A crypto-focused task force led by Commissioner Hester Peirce, who earned the nickname “Crypto Mom” for her longstanding support of digital asset innovation, is now steering policy.

Coinbase’s Chief Legal Officer Paul Grewal called the dismissal a major victory, not just for the company but for the broader cryptocurrency industry and its users.

What this means for the crypto market

Markets reacted predictably. Coinbase’s stock climbed approximately 5% in pre-market trading following the announcement.

With the enforcement-first era apparently winding down, attention is shifting to Congress. Legislative efforts around market structure and stablecoin regulation are expected to take center stage.

The tokens named in the original SEC complaint, including Solana, Cardano, and Polygon, haven’t received official clarity on their securities status. The dismissal means the SEC isn’t pursuing those claims right now, but it doesn’t mean Congress has settled the question.

Coinbase has indicated it will continue advocating for clearer regulations, aimed at protecting consumers and enhancing market clarity.