With a Coinbase dismissal pending, what’s next?

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.

The industry celebrated Coinbase’s revelation that the SEC is set to drop its case against the company. 

Then the Bybit hack occurred, reminding us all of how erratic crypto news can be. 

You can read about the Bybit stuff here; I want to expand on what the SEC’s latest moves could mean going forward. 

Arie Heijkoop, a partner in Haynes Boone’s investment management division, pointed out the significance of the pending Coinbase action dismissal being “with prejudice” — meaning the SEC doesn’t expect to bring the case back.

He also pointed to the joint filing to “stay” the SEC-Binance case, signaling the agency’s pivot from its regulation-by-enforcement approach (at least toward crypto exchanges). 

“It could therefore also indicate the SEC’s leanings in the Binance and Kraken suits down the road,” Heijkoop said of the agency’s Coinbase decision. “But it does seem to be doing a methodical review of each case on its merits, rather than a blanket reverse on similar open matters.”

Could the 60-day postponement in the Binance case indicate a self-imposed timeline for future guidance by the SEC? Heijkoop said that’s what he’ll be watching for.

So, despite Bitwise general counsel Katherine Dowling noting the agency might be in a “purgatorial state” ahead of Paul Atkins’ confirmation, there is indeed movement. She said she’s not surprised the Coinbase case was “one of the first to fall.” 

This suit was “distinguishable” from the Binance lawsuit filed the day before in June 2023, Dowling noted. The one against Binance alleged fraud and mishandling of customer funds, while the Coinbase case hinged on digital asset classification questions.

“The fact that the SEC had allowed Coinbase to go public after a lengthy process also called into question the bona fides of the case from the start,” she told me. “What had changed fundamentally that caused what appeared to be an about-face by the SEC?” 

We can assume cases with hard evidence of fraud will — and should — proceed, Dowling argued. Those dealing with digital asset classification will more likely be scrutinized and resolved via settlement or outright dismissal. 

Hester Peirce addressed the way the SEC thinks about such classifications in a Friday statement titled “There Must Be Some Way Out of Here.”

Heijkoop doesn’t expect the Coinbase dismissal to indicate how the SEC will approach enforcement actions against any crypto coins or tokens themselves.

“There are pretty significant differences in the many different coin options available, so there is not likely to be a one-size-fits-all approach to regulation of coin issuances,” he added.

I had connected with Heijkoop and Dowling before Robinhood’s news Monday: The SEC closed its investigation (after handing the trading app a Wells notice last year) and won’t pursue an enforcement action.

So, what now?

“I would expect that we should see action in the Ripple litigation next with review no doubt already underway,” Dowling said. “The SEC has spent years and millions scrapping with Ripple with little at this point to show for these efforts and some judicial spankings to boot.”

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.