Coinbase Wants Oregon's 'Copycat' Securities Case in Federal Court

In a move that has sparked controversy, cryptocurrency exchange Coinbase is seeking to have a securities lawsuit from Oregon's Attorney General heard in federal court. The case, which accuses the firm of selling unregistered securities to state residents, bears striking similarities to a prior Securities and Exchange Commission (SEC) lawsuit that was settled earlier this year.

Coinbase has argued that the lawsuit filed by Oregon Attorney General Dan Rayfield is an "attempt to invade the province of federal law" and should be heard in federal court rather than state courts. The exchange claims that the case is a "copycat" of the SEC's 2023 lawsuit, which alleged that Coinbase sold unregistered securities. The SEC had agreed to drop the case in February, one of many crypto cases it abandoned under the Trump administration.

"Dissatisfied with the federal government's recent enforcement decisions, Oregon's new Attorney General has set out to dictate the future of digital assets and the nationwide platforms on which they trade — on his chosen terms, timing, and turf," Coinbase wrote in a June 2 motion filed in a Portland federal court. The exchange claimed that Rayfield's suit exceeds his authority and is an overreach by the state.

Rayfield, however, argued that he sued Coinbase because the exchange "sold high-risk investments without them being properly vetted to protect consumers" and that the alleged unregistered securities are "vulnerable to pump-and-dump schemes and fraud." The Attorney General claimed that he took action after the SEC dropped its case against Coinbase and reassigned its top crypto litigator to the agency's IT desk.

"The states must fill the enforcement vacuum being left by federal regulators who are giving up under the new administration and abandoning these important cases," Rayfield said. He added that Oregon's complaint against Coinbase is a necessary step to protect consumers in the state.

In recent months, several US states have dropped their lawsuits against Coinbase, with Kentucky being the third state, following Vermont and South Carolina, to have abandoned legal action against the exchange. The move has raised questions about the role of state regulators in enforcing securities laws and whether they should be allowed to take matters into their own hands.

Coinbase's chief legal officer, Paul Grewal, said that "Oregon's claims raise fundamentally federal issues like the meaning of 'investment contract,' which he added should be resolved by a federal court." The exchange has sought to have the case heard in federal court, arguing that it is a matter of federal law and not state law.

The outcome of this case could have significant implications for the cryptocurrency industry and the role of state regulators in enforcing securities laws. As the crypto landscape continues to evolve, it remains to be seen whether Coinbase will ultimately succeed in having its lawsuit heard in federal court or if Rayfield's efforts to protect Oregon's consumers will prevail.