Cryptocurrency exchange Coinbase is pressing the US Department of Justice to step in over state-level crypto enforcement after federal regulators abandoned their case against the company earlier this year.
In a 14-page letter sent Monday to the Department of Justice (DOJ), Coinbase Chief Legal Officer Paul Grewal said federal officials should take action in response to state-level enforcement directed against cryptocurrency companies. According to Grewal, the DOJ should urge Congress to “step in and enact broad preemption provisions.”
“When Oregon can sue us for services that are legal under federal law, something’s broken,” said Grewal in a Tuesday X post. “This isn’t federalism–this is government run amok.”
Coinbase letter to Justice Department official. Source: Paul Grewal
The letter followed an April lawsuit from Oregon Attorney General Dan Rayfield, who alleged Coinbase sold unregistered securities to state residents — claims similar to those in a federal case previously brought by the Securities and Exchange Commission (SEC).
After the SEC dropped its lawsuit in February, several other US states’ securities agencies followed, including those in Vermont, South Carolina and Kentucky.
According to Rayfield, individual US states “must fill the enforcement vacuum being left by federal regulators who are giving up under the new administration and abandoning these important cases.”
Related: Oregon AG lawsuit against Coinbase calls XRP unregistered security
In response to the Oregon lawsuit, Coinbase filed to get the case heard by a federal judge. The case was moved to the US District Court for the District of Oregon in June.
The company also filed its own lawsuit in state court against Oregon Governor Tina Kotek in July, alleging the change in policy toward crypto “occurred entirely behind closed doors,” without “public hearings, debate, and eventual action” in the legislature. The lawsuit is scheduled for a status check hearing on Oct. 29.
Congress is still moving forward on market structure
Amid the Oregon and Coinbase lawsuits, lawmakers on the US Senate Banking Committee are expected to soon take up a vote on legislation to establish a digital asset market structure.
The bill is expected to clarify the roles the US financial regulators, the SEC and Commodity Futures Trading Commission (CFTC), would have over crypto regulation and enforcement.
“The Department should submit a views letter urging Congress to adopt broad preemption provisions in any market-structure legislation,” said Grewal.
“Any preemption provision should characterize federally regulated digital assets as exempt from state blue-sky laws, make clear that new state licensing and other state regulatory requirements do not apply to crypto intermediaries, and apply retroactively,” Grewal said.
While Coinbase currently faces no active federal cases, the company filed a motion last week over a Freedom of Information Act request involving text messages from former SEC Chair Gary Gensler.
The exchange has filed more than one request for information with the SEC amid a 2023 civil enforcement action — likely looking for evidence around its reasons for bringing a case against a crypto company over alleged securities.
Cointelegraph reached out to the Oregon Attorney General’s office for comment on the Coinbase letter, but had not received a response at the time of publication.
Magazine: Can privacy survive in US crypto policy after Roman Storm’s conviction?