On February 27, 2025, the Securities and Exchange Commission (“SEC”) handed the crypto industry yet another series of wins, as Acting Chair Mark Uyeda powerfully steers the agency away from regulation by enforcement.  

First, the SEC dismissed its protracted litigation with Coinbase with prejudice, ending the case permanently.  The SEC sued Coinbase in June 2023 alleging that the crypto platform was operating as an unregistered exchange and listing tokens it deemed as securities.  Coinbase strenuously opposed the lawsuit, criticizing the SEC for failing to provide regulatory clarity.  The SEC said that “the dismissal will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry.”  The SEC’s decision to drop the Coinbase lawsuit follows dismissals of cases against several other major industry players over the last week – confirming a major policy shift.  Commissioner Hester Pierce – the leader of the SEC’s new Crypto Task Force – enthusiastically supported the Commission’s decision to drop the Coinbase action, noting how the SEC’s sweeping application of the Howey test to the crypto industry “harmed the American public” and “impeded the ability of the Commission’s skilled and dedicated professional staff to use their expertise as it was intended to be used.”  Commissioner Pierce warned, however, that while the SEC’s new directive under the Crypto Task Force drove the Coinbase dismissal, it “does not signal an end to the Commission’s use of its enforcement tool in appropriate cases.”

Second, the SEC’s Division of Corporation Finance announced its view that “meme coins” – a type of crypto asset inspired by internet memes, characters, current events, or trends – do not meet the definition of “security” or “investment contract” under the federal securities laws.  Applying the Howey test, the SEC found that the offer and sale of meme coins does not involve an investment in an enterprise nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.  As a result, transactions involving meme coins do not require SEC registration, and purchasers are not protected by federal securities laws.  This statement aligns with previous comments made by Commissioner Pierce who has said that “many” of the meme coins on the market fall outside of the SEC’s jurisdiction.  While recognizing that people should have the right to exercise their “wonderful American liberty” and decide for themselves whether to invest in crypto assets, Commissioner Pierce stressed that people should also “not look to Mama Government to … bail them out when they do something that turns out badly.”