The SEC and Gemini reach a tentative settlement over the Gemini Earn program, signaling a shift toward greater crypto regulatory cooperation.
By Godfrey Benjamin
Editor Hamza Tariq
Updated
3 mins read
After two years, the United States Securities and Exchange Commission (SEC) has finally come to “a resolution in principle,” with Gemini, the cryptocurrency exchange run by Tyler and Cameron Winklevoss.
As it stands, the regulator is looking to completely resolve the litigation that involves Gemini Earn, a program that led to a legal brawl between Gemini and Genesis Global Capital, LLC.
Based on a court filing that was sent to Judge Edgardo Ramos in the U.S. District Court for the Southern District of New York on September 15, lawyers for Gemini Trust Company, LLC, and the SEC claimed that they have come to a resolution.
The regulator intends to sign off on the lawsuit that has been ongoing for two years. However, this is subject to approval by the Commission.
“The parties in this case have reached a resolution in principle that would completely resolve this litigation, subject to review and approval by the Commission,” per the filing. Both parties also requested that the court put all “pending dates” on hold.
Back in 2021, Gemini launched an initiative that allowed its customers to lend their assets to Genesis, a firm that has now gone bankrupt.
In return, they earned up to 7.4% APY through the Gemini Earn program. This interest-earning service later sparked a dispute between the two companies.
This is because Genesis’s lending arm halted customer withdrawals after exposure to some major bankruptcies. This singular action affected Gemini’s customers who had their funds locked up in the Earn program.
In the long run, Gemini had to terminate the program, including the master loan agreement (MLA) between both entities.
Gemini was then ordered by the New York State Department of Financial Services (NYDFS) to pay a fine to the tune of $1.1 billion to settle affected customers.
Their matter got the attention of the US SEC, with the regulator claiming that the Earn program violates Federal Securities laws by offering unregistered securities to investors.
Both Genesis and Gemini highlighted that the SEC’s assertions were without substance and failed to establish a breach of securities laws. On this premise, they filed a motion asking that the SEC suit be dismissed.
The current stance of the SEC in this matter reflects the strong pivot that the Commission has experienced in the last 8 months.
With Donald Trump as the President of the United States and Paul Atkins as SEC Chairman, the agency has become more considerate of crypto firms in the legislation.
At the beginning of this month, the SEC chairman and Caroline Pham, the acting chairman of the Commodity Futures Trading Commission (CFTC), stated that they are advocating for increased collaboration between their respective agencies.
They hope to achieve pro-crypto regulatory modifications as part of a fresh approach to encourage the adoption of digital assets in various markets.
In other words, the SEC and CFTC are jointly working towards fostering “harmonization between US market regulators.”
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Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
