SEC and Gemini seek resolution in crypto lawsuit

The U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange Gemini have jointly filed a motion requesting a 60-day stay in their ongoing legal case.

This move aims to explore a potential resolution to the SEC’s lawsuit over Gemini Earn, a crypto lending program accused of offering unregistered securities.

The lawsuit, originally filed in January 2023, alleges that Gemini Earn raised billions of dollars in crypto assets from approximately 340,000 investors without proper registration.

According to the SEC, the program constituted an investment contract under the Howey test, as investors expected profits based on the efforts of Genesis Global Capital, Gemini’s partner in managing the program.

This joint motion comes shortly after Gemini co-founder Cameron Winklevoss revealed that the SEC had closed its investigation into the company, signaling a shift in its approach toward crypto firms.

The SEC has recently dropped or paused lawsuits against several major players in the industry, including Coinbase and OpenSea, reflecting a more conciliatory stance following President Trump’s election.

Despite these developments, legal challenges against Gemini remain significant.

In March 2024, a federal judge denied motions by Gemini and Genesis to dismiss the SEC’s claims.

The court ruled that the SEC had plausibly alleged violations of securities laws under both the Howey and Reves tests.

Judge Edgardo Ramos stated that Genesis pooled investor assets and lent them to institutional borrowers, creating an expectation of profits dependent on Genesis’ management.

Gemini has faced additional legal troubles beyond the SEC case.

Earlier this year, it agreed to pay $5 million to settle allegations by the Commodity Futures Trading Commission over misleading statements.

The company also reached a $50 million settlement with New York’s attorney general regarding its Earn program.

As Gemini navigates these legal hurdles, it is reportedly preparing for an initial public offering later this year while restructuring its leadership team.

The SEC’s motion for a stay could mark a turning point in resolving one of the most contentious crypto-related lawsuits in recent years.

Both parties have yet to comment on the potential terms of a settlement.