Coinbase urges US DOJ to act against state enforcement actions.

Coinbase Calls for Federal Action Amid State-Level Enforcement

Cryptocurrency exchange Coinbase is urging the U.S. Department of Justice to intervene in state-level crypto regulation after federal regulators dropped lawsuits against the company earlier this year.

In a letter to the DOJ on Monday, Paul Grewal, Coinbase’s Chief Legal Officer, emphasized that federal officials should respond to the state enforcement actions aimed at cryptocurrency firms. He suggested that the DOJ should push Congress to “introduce a wide range of preemptive clauses and enact them.”

Grewal expressed concern, stating, “When Oregon can sue legal services under federal law, something is broken.” He further remarked on social media that this situation feels more like government control than genuine federalism.

This letter comes in response to an April lawsuit from Oregon Attorney General Dan Rayfield, claiming that Coinbase sold unregistered securities to residents of the state. Following this, several other states, including Vermont, South Carolina, and Kentucky, initiated similar actions after the SEC dropped its lawsuit in February.

Rayfield noted that state authorities “need to fill in the vacuum of enforcement left by federal regulators who are giving up these important cases under the new administration.”

In reaction to the lawsuit from Oregon, Coinbase launched its own federal suit, which was moved to the U.S. District Court for the District of Oregon in June. Additionally, in July, the company filed a suit against Oregon Governor Tina Kotek, claiming that changes in crypto policy occurred without proper discussion or transparency. A status check hearing for this case is set for October 29th.

Congress Moves Ahead with Digital Asset Market Structure

In light of the legal disputes between Oregon and Coinbase, members of the U.S. Senate Banking Committee are expected to quickly vote on legislation aimed at establishing a digital asset market structure. This proposed bill aims to clarify the roles of U.S. financial regulators like the SEC and the Commodity Futures Trading Commission (CFTC) in overseeing crypto regulations and enforcement.

Grewal urged that the department should advocate for a broad preemptive clause in market structure laws, which would exempt federally regulated digital assets from state blue laws. He argued that new state licensing and regulatory requirements should not apply to crypto intermediaries and should be retroactively enforced.

Although Coinbase is not currently facing active federal lawsuits, the company recently submitted a Freedom of Information Act request that includes a text message from former SEC Chairman Gary Gensler. During its civil enforcement actions in 2023, Coinbase filed multiple requests for information with the SEC, which could indicate preparations for future legal challenges regarding securities regulations.