SEC Drops the Coinbase Case: What Does It Mean for the Ripple Lawsuit?

The SEC is dropping its lawsuit against Coinbase, according to an announcement from CEO Brian Armstrong. However, the Commission’s lawsuit against Ripple remains open for now, raising more questions.

Both lawsuits deal with certain cryptoassets’ status as securities, not commodities. For Coinbase, this interpretation would hamper operations, but it could prove fatal for the XRP issuer.

SEC Drops the Coinbase Suit

Brian Armstrong, the founder and CEO of Coinbase, is having a good day today. Recently, the company has been advocating for better US crypto regulation, and it achieved a major milestone today. Armstrong announced that the SEC was dropping its 2023 lawsuit.

“Great news! After years of litigation, millions of your taxpayer dollars spent, and irreparable harm done to the country, we reached an agreement with SEC staff to dismiss their litigation against Coinbase. Once approved by the Commission (which we’re told to expect next week) this would be a full dismissal, with $0 in fines paid and zero changes to our business,” he said.

Armstrong called this development “hugely vindicating,” claiming it was a real challenge to resist the Commission’s “mafia tactics” under the previous leadership.

He also said that this suit is a groundbreaking development for the future of crypto in the US because it would’ve substantially hindered exchanges’ ability to do business nationwide. For Coinbase, the SEC legal battle appears over.

However, the SEC has another active crypto lawsuit – its fight against Ripple. The two suits have major similarities, both hinging upon the notion that certain cryptoassets are securities. This interpretation opens crypto-related businesses to much stricter regulation.

How Will the Coinbase Settlement Impact the XRP Lawsuit?

For Coinbase, the issue is that the SEC insisted upon a lack of clarity with these classifications, essentially claiming that it could demand the exchange delist any token at a whim. In the Ripple case, however, it alleged that the firm was forbidden from raising funds through XRP token sales without registration.

In both instances, the SEC leaned on a lack of clear standards for crypto.

Even before today’s announcement, the SEC had already signaled it would drop charges against Coinbase, but the process has been murkier for Ripple. The Commission recently removed the XRP lawsuit from its website, and may be waiting for a few broader changes to dismiss it outright.

Ultimately, however, the Ripple case may be more complicated. The SEC alleged that Coinbase was hosting certain unlawful assets, and complying would severely impact the business model for all exchanges.

In the latter suit, it claimed that selling XRP was itself a securities violation, which would severely impact a great number of token projects.

The SEC is already taking a few measures to lay the groundwork for a broader policy realignment. Commissioner Peirce claimed that it wants to formally remove some tokens’ security status.

Also, the Commission is looking to reduce its crypto enforcement activities generally. Overall, the Coinbase case does provide some optimism for the XRP community.