Coinbase Urges DOJ Intervention
In a notable action, Coinbase is urging the U.S. Department of Justice (DOJ) to intervene regarding state enforcement actions targeting cryptocurrency companies. This request follows a period earlier this year when federal regulators abandoned their case against the popular cryptocurrency exchange.
Details of the Request
On Monday, Paul Grewal, Coinbase’s Chief Legal Officer, articulated the company’s position in a detailed 14-page letter, calling for federal action in response to state-level initiatives that he argues undermine federal authority. Grewal insists that the inconsistency of state lawsuits, such as Oregon’s claim of Coinbase selling unregistered securities despite the legality of the services under federal law, reveals a flawed system. He remarked,
“This isn’t federalism–this is government run amok,”
in a post on X (formerly Twitter) made the following day.
Background of the Situation
The backdrop of this request comes after Oregon’s Attorney General, Dan Rayfield, initiated a lawsuit in April against Coinbase, echoing allegations previously made by the Securities and Exchange Commission (SEC). The SEC had accused the company of engaging in the sale of unregistered securities, but it dropped its case in February, prompting a domino effect where other states—Vermont, South Carolina, and Kentucky—also walked away from similar enforcement actions.
Rayfield posits that with the federal government seemingly retreating from its regulatory responsibilities, states are compelled to fill the enforcement gap. In response to the suit from Oregon, Coinbase has sought to move the case to a federal court, which was later transferred to the U.S. District Court in Oregon. Additionally, the company initiated its own suit in July against Oregon Governor Tina Kotek, challenging the shift in state policy on cryptocurrency which, they claim, occurred without public input or legislative process. A status check for this lawsuit is slated for October 29.
Legislative Discussions
In parallel, discussions are taking place within the U.S. Senate Banking Committee concerning legislation aimed at defining a framework for the digital asset market. This proposed bill aims to clarify the jurisdictional roles of federal regulators such as the SEC and the Commodity Futures Trading Commission (CFTC) regarding cryptocurrency regulation. Grewal has recommended that the DOJ advocate for the inclusion of preemption provisions in any legislation, which would protect federally regulated digital assets from state regulations and requirements that could hinder the industry.
Ongoing Efforts
Although currently Coinbase does not face any active federal cases, it is pursuing information through a Freedom of Information Act request linked to text messages from former SEC Chair Gary Gensler. This pursuit aligns with their strategy amidst ongoing civil enforcement actions, as the company seeks clarity on regulatory motives.
Cointelegraph attempted to reach the Oregon Attorney General’s office to gather their perspective on Coinbase’s letter but did not receive a reply as of the time of this report.
