The Gemini exchange has filed a motion to dismiss the SEC’s lawsuit against it, arguing that the SEC’s claim that it sold unregistered securities expands the regulator’s reach “beyond any reasonable reading” of the law. In response to the regulatory environment at home, the company is making a strategic turn toward European markets.
Gemini cryptocurrency exchange is seeking to have a lawsuit against it dismissed. In a filing with the New York court where it is being sued by the Securities and Exchange Commission (SEC), Gemini has argued that the case against it is flawed and should be dismissed.
In January, the SEC filed a lawsuit against Gemini and Genesis alleging that the Gemini Earn program violated securities law. Genesis was Gemini’s partner in the scheme and has since filed for bankruptcy.
After its bankruptcy, Genesis halted Earn withdrawals in November 2022. Gemini then completely shut down the service in January. The two companies have since reached a $100 million settlement to recover user funds.
Doing what has become a familiar SEC line under Chairman Larry Gensler, the commission has cited the need to protect consumers in its case against Gemini and Genesis.
Arguing that Gemini and Genesis offered unregistered securities to the public, Gensler said that “crypto lending platforms and other intermediaries must abide by our time-tested securities laws.” He added that doing so better protects investors and builds confidence in the markets.
Gemini Says MDALA Is Not a Security
In Friday’s motion to dismiss the SEC’s lawsuit against it, Gemini argues against the regulator’s claim that the Earn scheme functioned as a security sale. The documents filed with the court claim that the SEC’s complaint is “a novel attempt to expand its scope beyond any reasonable reading of the relevant legal language.”
Ultimately, the issue boils down to exactly what kind of relationship existed between Gemini, Genesis, and individual Earn users.
This relationship realized as the Master Digital Asset Lending Agreement (MDALA), established the framework for Gemini Earn. Under the agreement, Genesis acted as a borrower, allowing users to earn interest by lending their crypto assets. Gemini itself acted as an intermediary and custodian.
However, Gemini argues that the MDALA itself never required any lending or borrowing. Instead, athletic contests claim that it is simply a mechanism that facilitates agreements between the borrower and the lenders.
If the court sides with Gemini, it will invalidate the SEC’s assertion that MDALA was sold as a security. As Gemini states in its appeal, the complaint against it: “never explains how, when, or where MDALA was allegedly sold.”
Gemini Turns Its Eyes to Europe as the Winklevoss Twins Settle in London
Against the backdrop of the SEC’s aggressive approach to digital assets, Gemini is reportedly considering relocating its operations offshore. The firm’s founders, Cameron, and Tyler Winklevoss, recently met with the UK’s financial regulator to discuss a possible relocation to London.
Such a move is not the only indicator that Gemini is pivoting away from the US, as on Thursday, the cryptocurrency exchange announced that it will open a new European headquarters in Dublin.
Taking to Twitter to celebrate the news, Cameron Winklevoss praised the European Union’s approach to regulating cryptocurrencies. Specifically, he called the Markets in Cryptoassets (MiCA) Regulation “common sense legislation.”
By Audy Castaneda
