by Jude Ayua

The United States Securities and Exchange Commission (US SEC) has dropped its cases against Coinbase and OpenSea amid ongoing regulatory reforms.

US SEC rights a major wrong, says Coinbase

Coinbase, the largest cryptocurrency exchange in the US, has announced that the US SEC has agreed to drop its case against it.

Paul Grewal, the Chief Legal Officer of Coinbase, noted in a blog post on 21 February, “SEC staff has agreed in principle to dismiss its unlawful enforcement case against Coinbase, subject to Commissioner approval—righting a major wrong.”

In a video announcement on X, the Chief Executive Officer of Coinbase, Brian Armstrong, celebrated this development as a win for the exchange and the crypto industry.

“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 in anticipation.

US SEC’s regulation-by-enforcement

Armstrong criticized the US SEC’s approach for the past four years under the President Biden Administration, emphasizing the need to get legislation for the US crypto industry:

“…if this goes through, it is still a very important legal precedent to right the wrong that was taking place over the last few years where the SEC unlawfully, in my view, decided to attack and tried to kill the entire crypto industry by suing lots of different companies including us, claiming that many of these crypto assets were securities.”

Armstrong stressed that the US SEC acted despite there not being any law directing their actions. “They didn’t publish any clear rules to the industry… We should not forget how close we came here to view bad actors in the government actually going off and trying to kill this industry,” he said.

Resistance and determination

Armstrong disclosed that people discouraged him from taking action against the US SEC:

“I remember in 2023, a lot of people were advising me on this saying, ‘you know, do not engage in litigation with the SEC; it’s going to cost you tens of millions of Dollars; it’s going to put downward pressure in your stock price; and you know, the SEC might fight dirty, like pressure other companies not to work with you.’ Unfortunately, that did happen in a couple of cases.”

Armstrong what motivated the exchange to proceed with the SEC action:

“I think what gave me the courage to do it was number one, I knew that we were right. Number two, if we didn’t stand up to this bullying, it might have been the end of the crypto industry in America. We had to spend about $50 million defending this case. And number three, we needed to stand up for our customers’ rights: they weren’t doing anything wrong and they wanted to use this technology. I wasn’t going to let some activist regulator come through and try to make up a new law that didn’t exist and take away our customers’ rights.”

He added, “I’m really proud of where this case landed. I hope it creates a domino effect in other cases…”

Armstrong also emphasized, “We’re never going to stop fighting for crypto.”

Ripple Labs CEO reacts

Reacting to the US SEC’s decision to drop the Coinbase case, Ripple CEO Brad Garlinghouse, said that the agency is now moving on “quickly” from its policies in the Biden Administration.

“Suffice it to say (as I know there are lots of impatient people, including me!), this SEC has demonstrated a clear interest in moving on quickly (!) from the failed regulation by enforcement policies of the last Administration,” Brad wrote on X.

Meanwhile, the SEC’s suit against Ripple is still pending, with the expectation that the SEC may eventually drop the suit or reach an amicable settlement with Ripple.

OpenSea’s case closed

The non-fungible token (NFT) marketplace, OpenSea’s Founder Devin Finzer said in a post on X on 21 February that the US SEC has closed its probe into OpenSea.

“The SEC is closing its investigation into OpenSea. This is a win for everyone who is creating and building in our space,” Finzer said.

To Finzer, the end of this case is for the benefit of the industry. “Trying to classify NFTs as securities would have been a step backward—one that misinterprets the law and slows innovation,” he said.

“Every creator, big or small, should be able to build freely without unnecessary barriers,” Finzer added.

The US SEC began its probe into OpenSea in August 2024 after issuing OpenSea a Wells notice, claiming that the platform had served as a marketplace for unregistered securities.

Finzer expressed shock at the notice, vowing to fight what he perceived as a threat to art and creativity. OpenSea received backing from key players in the industry, including Jake Chervinsky, the Chief Legal of Variant, who said that the SEC has “lost the plot.”

“The idea that [the SEC] would have jurisdiction over digital art … defies not only common sense but also the SEC’s statutory authority,” Chervinsky said.

Industry reactions

Crypto industry stakeholders have reacted positively to the SEC closing its investigation into OpenSea.

Chris Akhavan, NFT marketplace Magic Eden chief business officer, said that although Magic Eden is a competitor to OpenSea, he believes this win is a win for the entire industry.

“While we are competitors in the trenches, we share a deep belief in NFTs and what they will enable. Happy to see such a win for the space,” Akhavan wrote in an X post.

A pseudonymous crypto commentator, Beanie, also wrote on X:

“OpenSea did a wonderful thing for the NFT industry by facilitating some regulatory clarity. I’m sure it has come at great cost as well. So we should all be thankful for that.”

Looking ahead

The US SEC has begun regulatory reforms and proactive policy formulation for the crypto industry since the beginning of President Donald Trump Administration. As a core member of the President’s Working Group on Digital Asset Markets, the US SEC established a new Crypto Task Force in January. The Task Force Chair, Commissioner Hester M Pierce, noted that the SEC turned away from its enforcement approach and is working to introduce structured regulations.

Earlier in February, the US SEC agreed with Binance Holdings Limited to halt their suit for 60 days, citing the ongoing reforms at the SEC as possibly impacting the outcome of the case. Similarly, in late January, the US SEC and Dragonchain Inc mutually agreed to halt their suit for the same reason as in the Binance case.

With the major developments above, the US SEC will eventually clear its enforcement actions and focus on addressing key issues in the industry, including investor protection and market integrity.

Jude Ayua is a policy analyst at CAB. A lawyer, Jude is an associate at Infusion Lawyers where he is a member of the Blockchain & Virtual Assets Group. He is also a member of the Policy & Regulations Committee of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). Jude reports and writes on crypto policy and regulations. jude@infusionlawyers.com

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US SEC drops cases against Coinbase and OpenSea.