The US Securities and Exchange Commission (SEC) is set to drop a lawsuit against major crypto trading platform Coinbase that sought to regulate cryptocurrency tokens as securities, the most dramatic move yet to reshape the country’s crypto policies.

Coinbase said the SEC staff had “agreed in principle” to dismiss the case, although doing so depends on a commission vote that is expected to take place this week.

“It’s a great day for Coinbase and for crypto,” said Coinbase chief legal officer Paul Grewal in a blog post.

Pro-crypto stance

The SEC has been expected to resolve its litigation with crypto firms following the re-election of Donald Trump, who campaigned on a pro-crypto platform, but the SEC’s reversal of its position on a critical issue remains a rare move.

The agency is moving to refocus a special enforcement unit that previous SEC chair Gary Gensler had used investigate crypto companies.

The unit, now renamed to focus on “cyber and emerging technologies”, will focus on issues including fraud involving crypto assets, said acting SEC chair Mark Uyeda.

The SEC in 2023 sued major crypto firms Binance, Coinbase and Kraken in an effort to bring crypto companies into line with existing securities laws that aim to protect investors.

Crypto companies argue that cryptocurrency offerings are not securities and have campaigned for dedicated rules for the industry.

New rules

House and Senate lawmakers are currently developing legislation that would treat most cryptocurrencies as commodities, which are given far less oversight.

Dismissal of the SEC’s case is expected to allow Coinbase to list more tokens and diversify into areas such as staking, which allows investors to earn interest from their tokens.

The SEC lawsuit had alleged that Coinbase’s staking programme was an illegal sale of securities, which Coinbase denied.