Crypto: SEC drops charges against Gemini Earn

In a context of persistent tensions between the crypto ecosystem and American regulation, the SEC has just reached an unexpected milestone. The agency has definitively dropped its civil action against Gemini Trust, sealing the end of the Gemini Earn matter. This decision, legally qualified as “classification with impossibility of reopening”questions the regulator's strategic shift towards 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 terminated its civil action against Gemini Trust Company, relating to the Gemini Earn program after several negotiations.

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

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

Here is the main elements which led to the closure of the case:

• Full Refund for Gemini Earn Customers: SEC Recognizes Users Will Receive 100% Restitution, In-Kind, Through Genesis Bankruptcy Proceedings;

• 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: Separately, Genesis Global Capital agreed to pay $21 million to the SEC in an independent settlement;

• A dismissal with prejudice: the SEC specifies that the action is permanently abandoned, which prevents any future reintroduction of the same accusations;

• The absence of moral acquittal: the regulator emphasizes that this withdrawal does not imply approval of Gemini's conduct, but is based on the satisfaction of aggrieved investors.

This closure is therefore neither a legal victory for Gemini nor a waiver of principle on the part of the regulator. It is part of a logic of priority repair of harm caused to customers.

A strategic shift in the regulatory approach?

If the closure of the legal case marks the end of a chapter for Gemini, it also raises many questions about the SEC's current strategy.

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

This positioning reflects a more nuanced posture. By not continuing a highly publicized procedure to the end, the regulator is sending a signal of new flexibility, without however renouncing its guideline on the compliance of yield products such as staking.

This change comes at a time when several similar cases are being redirected or suspended. Some analysts see this as a sign of a refocusing of the SEC's priorities. Others believe that the legal complexity of these cases, combined with recent legal setbacks in other cases, encourages the Commission to avoid lengthy and costly procedures if investors can be compensated otherwise.

The withdrawal of action against Gemini could thus inaugurate a new approach: less doctrinaire, more pragmatic, and more focused on economic reparations.

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