The rhythm of good news

Champagne must be flowing in crypto boardrooms around the US this week.

Last Friday, Coinbase revealed that the SEC had agreed to drop its case against the exchange, pending final confirmation (expected today).

The agency sued Coinbase back in June 2023, accusing it operating an unregistered securities exchange, broker and clearing agency. It also claimed Coinbase’s staking-as-a-service program constituted the offer and sale of unregistered securities. And it named a list of tokens it said were securities, leaving no room for the token issuers to push back or engage in dialog. The list included SOL, ADA, MATIC, FIL, SAND and others.

The SEC case was flimsy at best and would most likely have been struck down in court. But its cancellation removes an oppressive overhang, not just in terms of time and monetary cost for both the agency and Coinbase, but also in uncertainty as to the listed tokens’ status. It potentially clears the way for platforms such as Robinhood to reverse their delisting.

Dropping the case does not mean that the named tokens are not securities – rather, it removes the presumption that they are, and opens a path to a careful consideration of criteria and requirements. It also moves a decision on this from the courtroom to Congress, via the passage of relevant digital asset bills – a longer-lasting, less antagonistic and more efficient outcome.

Warming up

It turned out that the Coinbase reprieve was just the beginning.

Also on Friday, OpenSea revealed that the SEC had ended its investigation into the NFT platform after suggesting last year in a Wells notice that it believed OpenSea’s sale of NFTs constituted offerings of unregistered securities.

On Monday, we got the news that the SEC was also ending its investigation into Robinhood, which had received a Wells notice last year warning it of pending action for selling unregistered securities.

On Tuesday, it was the turn of defi app Uniswap – yes, the SEC also served them a Wells notice last year, informing them of pending action for operating an unregistered securities exchange, issuing unregistered securities and engaging in unregistered brokerage and clearing activity. This investigation has been dropped.

On Wednesday, crypto exchange Gemini announced that it, too, had received word from the SEC that the investigation against it had been closed.

And earlier today, word came out that the SEC has agreed to drop its case against Ethereum developer Consensys.

None of this is a surprise, given the change in regulatory tone in the US since the new Administration took office. And yet, it still comes as a huge relief for those directly affected as well as for the market as a whole – this new SEC is serious about building a constructive relationship with the crypto industry, one focused on frameworks rather than punitive enforcement of unclear rules and unreasonable interpretations.

Still ongoing, as I type, are the legal cases against Binance, Kraken and Ripple. These will be more complicated to untangle.

Earlier this month, a federal judge put the SEC’s lawsuit against Binance on hold for 60 days to give time for more clarity on new regulation, but the claims against the exchange are not exclusively based on grievances about registration and issuance. Binance is also accused of fraud and volume manipulation.

Also, the Binance case is further along and has some relevant rulings – the SEC could pause at least part of the process, but there are more moving parts.

Ripple and Kraken have a similar situation to contend with – there are existing rulings, and in the case of Ripple, an ongoing appeal from the SEC. The agency could decide to walk that back, although the next court deadline isn’t until mid-April. Kraken’s is at the end of March.

The timing matters in that the nominee for Chair has not yet started his confirmation process, and the SEC may prefer to leave more complex untanglings for when he is in his seat. When President Biden took office, Gary Gensler didn’t assume his role until late April. We could see Paul Atkins’ nomination move faster… unless, of course, the government shuts down on March 14 in the absence of a budget deal.

Stepping back, the speed with which the new SEC under Acting Chair Mark Uyeda is undoing the previous SEC’s damage is head-spinning. It’s not just the cancellation of spurious and expensive cases, it’s also the pace of meetings with both insiders and skeptics, and the breadth of questions posed in Commissioner Hester Peirce’s recent memo.

We’re not yet seeing this reflected in crypto startup funding announcements and blockchain-related acquisitions from traditional financial institutions – but that is likely to change over the coming months.

This is an excerpt from my Crypto is Macro Now newsletter, a ~daily publication where I look at the impact of crypto on the macro landscape, and vice versa. If you’re not a subscriber and you’re interested in seeing beyond the crypto impact noise, I hope you’ll consider becoming one!

Oh, and of course, nothing I say is investment advice!