Former SEC Chair Gary Gensler’s departure has not stopped the agency’s regulatory enforcement approach towards the crypto industry. Paradigm’s Vice President of Regulatory Affairs, Justin Slaughter, highlights that state-level lawsuits against crypto exchanges, like Coinbase, indicate a shift in enforcement efforts rather than a halt. Slaughter notes that with new federal leadership, regulatory pressure has moved to the state level, a common occurrence during US political transitions. He emphasizes that state lawsuits against crypto exchanges will continue until federal legislation is passed.
A specific example cited by Slaughter is Oregon’s lawsuit against Coinbase, which mirrors the SEC’s earlier case but makes targeted edits to distinguish itself. The Oregon complaint reduces references to “crypto asset securities,” a term criticized by the crypto industry, and differs in legal approaches from federal regulators. State attorneys general lack the resources and expertise of federal agencies but can create unpredictable actions with potentially divergent legal precedents.
The lack of comprehensive federal legislation poses challenges for the crypto industry, as ongoing state-level litigation leads to a patchwork of differing rules and court rulings. Slaughter warns that without a unified regulatory framework from Congress, crypto firms will face inconsistent legal outcomes across jurisdictions. Many state cases intentionally avoid federal courts by focusing solely on state law, making it difficult for firms to defend themselves and seek uniform treatment.
Slaughter stresses that enforcement actions from both federal and state levels indicate that litigation alone cannot resolve regulatory uncertainty in the crypto industry. He urges Congress to urgently craft legislative solutions for the digital asset sector, as the issue will not disappear on its own. The persistence of regulatory pressures at the state level underscores the need for comprehensive federal legislation to provide clarity and consistency for crypto firms and investors.
