The U.S. Securities and Exchange Commission (SEC) and crypto exchange Gemini have jointly asked a New York court to pause their ongoing lawsuit over the Gemini Earn program for 60 days, signaling interest in exploring a potential resolution.
Background
- The SEC originally filed suit against Gemini and Genesis Global Capital in January 2023, accusing both firms of offering unregistered securities through the Gemini Earn program.
- While Genesis settled with the SEC in March 2024 for $21 million, the case against Gemini has remained unresolved.
- However, in a joint letter filed on April 1, both parties requested a stay of proceedings and all associated deadlines to allow discussions around a potential settlement. The letter was addressed to Judge Edgardo Ramos in the Southern District of New York.
- Gemini Earn was a high-profile lending product that allowed users to earn interest by lending out their crypto assets.
- The program collapsed after Genesis, the program’s lending partner, froze withdrawals in November 2022 amid broader market turmoil.
Why Should You Pay Attention?
- The decision to explore a resolution could mark a shift in the SEC’s approach to crypto regulation under the Trump administration.
- A pause in the lawsuit may also provide broader regulatory clarity for crypto exchanges offering interest-bearing products, especially if it results in a formal settlement.
- It follows a trend of the SEC dialing back several crypto-related enforcement actions in recent months.
Who Said What?
- In the April 1 letter, attorneys for both the SEC and Gemini stated:
“The parties submit that it is in each of their interests to stay this matter while they consider a potential resolution and agree that no party or non-party would be prejudiced by a stay.”
- Gemini co-founder Cameron Winklevoss, speaking earlier in February when the SEC closed a separate investigation into the firm, criticized the agency’s tactics:
“The SEC cost us tens of millions of dollars in legal bills alone and hundreds of millions in lost productivity, creativity, and innovation.”
Zooming Out
- The SEC’s request for a pause in its case against Gemini comes amid a broader pattern of regulatory de-escalation in the U.S. crypto space.
- Under the current administration, the SEC has dropped or scaled back enforcement efforts against major industry players, including Ripple, Kraken, Coinbase, OpenSea, and Crypto.com.
- While the exact terms of a potential resolution between Gemini and the SEC remain unclear, the request reflects a thawing in the once-aggressive stance taken by regulators toward digital asset firms.
- If the case is ultimately settled, it could offer a framework for other crypto companies navigating legal challenges related to interest-bearing and lending products.
