Crypto Regulation Shift ? SEC Drops Gemini Lawsuit

In a context of persistent tensions between the crypto ecosystem and American regulation, the SEC has just taken an unexpected step. The agency has definitively dropped its civil action against Gemini Trust, sealing the end of the Gemini Earn case. This decision, legally qualified as “dismissal with prejudice”, raises questions about the regulator’s strategic shift regarding crypto yield products, and what this could imply for future relations between platforms and authorities.

The definitive closure of a major dispute

On January 19, the SEC officially ended its civil action against Gemini Trust Company, related to the Gemini Earn program after several negotiations.

Indeed, this program, launched in partnership with Genesis Global Capital, allowed clients to deposit their cryptos in exchange for a yield. In January 2023, the SEC had sued both entities for allegedly offering unregistered securities, thus violating the Securities Act of 1933.

A few months later, the federal regulator drops its lawsuits against Gemini, with prejudice, preventing any subsequent reopening of the case. According to documents filed in court, this decision follows full restitution of the concerned assets.

Here are the main points that led to the closure of the case :

• Full reimbursement of Gemini Earn clients : the SEC acknowledges that users will receive 100 % restitution, in kind, via the Genesis bankruptcy process ;

• An additional financial commitment from Gemini : the company has committed to contributing up to $40 million to facilitate the reimbursement process ;

• The separate settlement reached with Genesis : simultaneously, Genesis Global Capital agreed to pay $21 million to the SEC as part of an independent settlement ;

• A dismissal with prejudice : the SEC specifies that the action is dropped definitively, preventing any future re-filing of the same charges ;

• No moral exoneration : the regulator emphasizes that this withdrawal does not imply approval of Gemini’s conduct but is based on the satisfaction of the harmed investors.

This closure is therefore neither a legal victory for Gemini nor a renunciation of principle on the part of the regulator. It fits within a logic of prioritizing reparations for the harm caused to clients.

A strategic shift in regulatory approach?

While the closure of the legal case marks the end of a chapter for Gemini, it also triggers many questions about the SEC’s current strategy.

In its official statement, the agency specifies that “the withdrawal of the complaint should not be interpreted as an approval of past conduct,” emphasizing that this decision has “no impact on the interpretation of federal securities laws.”

This positioning reflects a more nuanced stance. By not pursuing to the end a highly publicized procedure, the regulator signals new flexibility, without giving up its guideline on compliance of yield products such as staking.

This change comes as several similar cases are experiencing reorientations or suspensions. Some analysts see this as a sign of the SEC refocusing its priorities. Others believe that the legal complexity of these cases, combined with recent judicial setbacks in other files, encourages the Commission to avoid lengthy and costly procedures if investors can be compensated otherwise.

The withdrawal of the action against Gemini could thus usher in a new approach: less doctrinal, more pragmatic, and more focused on economic reparations.

The definitive closure of the Gemini Earn case not only marks the end of a dispute but also opens a new strategic phase. While the SEC reviews its priorities, Gemini is preparing its entry into the prediction market, a rapidly growing sector where regulation could once again play a key role.