How the SEC Dropping the Gemini Case Marks a Turning Point in the ‘War on Crypto’
The recent news that the SEC drops Gemini case has sent ripples through the cryptocurrency world, marking a potential turning point in what some, including Cameron Winklevoss, are calling a “war on crypto.” After nearly two years of scrutiny, the U.S. Securities and Exchange Commission (SEC) has decided not to pursue enforcement action against Gemini, a crypto exchange led by the Winklevoss twins. This decision comes nearly 700 days after the investigation began and 277 days after a Wells Notice was issued.
The SEC initially charged Gemini alongside Genesis Global Capital in January 2023 over its now-defunct Earn program. The program allowed users to lend their crypto assets in exchange for yield, but the venture collapsed when Genesis halted withdrawals during the 2022 bear market. The SEC alleged that the Earn program involved the sale of unregistered securities, a claim that brought intense legal scrutiny upon Gemini.
While the closure of this case is a significant milestone, the SEC has made it clear that it does not constitute an official exoneration of Gemini. The commission has left the door open for future actions, signaling that regulatory uncertainty in the crypto space is far from over.
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Cameron Winklevoss, co-founder of Gemini, did not hold back his criticism of the SEC. He described the agency’s behavior as part of a broader assault on the crypto industry, which he believes has led to financial burdens for companies and stifled economic growth in the United States. According to Winklevoss, the SEC’s tactics have resulted in “tens of millions of dollars in legal bills” and immeasurable damage to the sector’s potential.
Looking ahead, Winklevoss proposed several measures to prevent similar regulatory crackdowns. He suggested reimbursement policies where companies entangled in baseless investigations could be compensated threefold for their legal expenses if an agency fails to establish clear rules beforehand. Additionally, he advocated for a “dishonorable discharge” policy that would publicly dismiss SEC officials involved in questionable enforcement actions. Another bold proposal included an “agency ban,” barring regulators who misuse their power from future government roles.
During former SEC chair Gary Gensler’s tenure, the commission took an aggressive approach against the crypto sector, launching over 100 enforcement actions since 2021. High-profile lawsuits targeted industry giants like Coinbase, Binance, Ripple, and Kraken, with allegations often revolving around the sale of unregistered securities. Critics argued that Gensler’s strategy amounted to “regulation by enforcement,” creating a hostile environment for innovation in the crypto space.
Since Gensler’s departure in January, there has been a noticeable shift in the SEC’s stance. The commission has softened its approach, recently closing investigations into notable firms such as Coinbase, OpenSea, Uniswap Labs, and Robinhood Crypto. This change has sparked optimism among industry leaders, including Winklevoss, who see it as a sign that the “war on crypto” might finally be winding down.
As the crypto industry continues to evolve, regulatory clarity will be crucial in fostering growth and innovation. The closure of the Gemini case is a step in the right direction, but it remains to be seen whether this marks a genuine shift in the SEC’s regulatory strategy or merely a pause in its broader campaign against the sector.
