Cryptocurrency exchange Coinbase is actively seeking intervention from the United States Department of Justice (DOJ) amid increasing state-level enforcement against crypto firms.
Following the dismissal of a federal case by regulatory authorities earlier this year, Coinbase’s Chief Legal Officer Paul Grewal authored a detailed 14-page letter requesting the DOJ to address the challenges posed by overlapping and conflicting state-level regulations.
Grewal emphasized the need for the DOJ to advocate in Congress for comprehensive preemption measures within the ongoing market structure legislation. His letter highlights concerns with individual states imposing lawsuits under their “blue-sky laws” despite certain services being federally legal.
Responding to the situation, Grewal stated that states like Oregon are pursuing legal actions against Coinbase for practices permitted under federal law, calling this scenario a failure of the regulatory framework and labeling it as “government run amok.”
This development follows an April lawsuit by Oregon’s Attorney General Dan Rayfield, alleging Coinbase sold unregistered securities within the state, mirroring claims once made by the Securities and Exchange Commission (SEC) at the federal level. After the SEC dropped its suit in February, other state regulators including Vermont, South Carolina, and Kentucky initiated their own enforcement actions.
Rayfield criticized federal regulators for abandoning cryptocurrency enforcement under the new administration, asserting that states must fill the regulatory void left behind.
In response to the Oregon lawsuit, Coinbase has pushed to transfer the case to federal jurisdiction. The matter now resides with the US District Court for the District of Oregon as of June. Additionally, Coinbase has initiated its own legal challenge against Oregon’s Governor Tina Kotek on grounds that regulatory changes were made without public legislative process.
Meanwhile, the US Senate Banking Committee is moving forward with legislation expected to define the roles of the SEC and Commodity Futures Trading Commission (CFTC) in digital asset regulation.
Grewal advocates for the DOJ to urge Congress to enact provisions exempting federally regulated digital assets from state blue-sky laws, preventing states from imposing new licensing and regulatory requirements on crypto intermediaries, and applying these rules retroactively.
Though Coinbase currently faces no active federal lawsuits, it recently filed a motion using the Freedom of Information Act to access text messages from then-SEC Chair Gary Gensler. These requests aim to uncover the basis of SEC’s enforcement against crypto companies on securities grounds.
Coinbase’s continued legal strategy highlights the complexity of digital asset regulation amid inconsistent state and federal approaches. Comments from Oregon’s Attorney General’s office were not available at publication time.
