The United States Securities and Exchange Commission (SEC) has agreed to drop its lawsuit against Cumberland DRW, a Chicago-based crypto trading firm. The case, initially filed in October 2023, accused Cumberland of operating as an unregistered securities dealer while handling over $2 billion in crypto assets.

On March 4, Cumberland announced via X (formerly Twitter) that it had signed a joint filing with the SEC to dismiss the case. According to the firm, the agreement was reached in principle on February 20 and is now pending official approval from the SEC.

Cumberland stated in its post:

We look forward to continuing our dialogue with the SEC to help shape a future where technological advancements and regulatory clarity go hand in hand.

The SEC’s decision to drop its case against Cumberland DRW is part of a broader trend of abandoned enforcement actions. Recently, the agency has also dropped cases against major crypto exchanges, including Coinbase and Kraken, as well as blockchain firm Consensys. Additionally, the SEC ended its investigations into NFT companies OpenSea and Yuga Labs, and crypto exchanges Gemini and Uniswap Labs.

These actions suggest a possible shift in the SEC’s approach, following criticism that its enforcement strategies have hindered innovation in the crypto space.

The SEC originally sued Cumberland DRW on October 10, 2023, alleging the firm had been acting as an unregistered securities dealer since March 2018. The agency claimed Cumberland had engaged in buying and selling digital assets classified as securities, including Polygon (MATIC), Solana (SOL), Cosmos (ATOM), Algorand (ALGO), and Filecoin (FIL).

The lawsuit sought permanent injunctive relief, disgorgement of allegedly ill-gotten gains, and civil penalties. However, Cumberland countered that it had registered as a dealer-broker in 2019 and had spent five years engaging in “good-faith discussions” with the SEC, only to be targeted under what it described as the agency’s “enforcement-first approach.”

The SEC’s decision to drop multiple high-profile crypto cases raises questions about the regulator’s long-term strategy. While the agency has historically taken an aggressive stance on crypto enforcement, the recent reversals may indicate a reassessment of its regulatory priorities or a response to mounting legal and industry pressure.

Moreover, Coinbase recently filed a Freedom of Information Act (FOIA) request to determine how much the SEC has spent on its crypto-related enforcement actions, suggesting increased scrutiny over the agency’s resource allocation.

With the SEC seemingly retreating from some of its previous legal battles, the crypto industry may see a more collaborative regulatory environment. However, uncertainty remains, as the agency continues to pursue other crypto-related cases.

For now, the dismissal of the Cumberland DRW lawsuit marks a significant moment in the ongoing dialogue between regulators and the digital asset industry, potentially signaling a shift toward clearer and more constructive regulatory frameworks.

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