Oregon’s Attorney General, Dan Rayfield, is standing firm against crypto exchange Coinbase’s attempt to move a securities violation lawsuit to federal court. This latest development highlights the ongoing conflict between state and federal authorities in the realm of cryptocurrency enforcement.
Rayfield has filed a motion asking a federal judge to remand the case back to Multnomah County, where it was initially filed in April. The Attorney General argues that this is a state law matter that should be adjudicated in the state court where it was originally brought. He dismisses Coinbase’s claims of a “regulatory land grab” as mere rhetoric and emphasizes the long history of shared state and federal securities enforcement.
The lawsuit, filed by Rayfield in April, accuses Coinbase of violating Oregon’s securities laws by promoting the sale of cryptocurrencies as unregistered securities to Oregon residents. The state alleges that Coinbase has profited at the expense of Oregonians who have suffered significant losses in a market that is stacked against them.
One of the key points of contention in this case is the difference between state and federal securities law. While a crypto asset may not meet the federal Howey test for being classified as a security, it could still be considered a security under Oregon’s Pratt test. This test, established in a 1976 Oregon Supreme Court case, looks at whether investors expect profits primarily from the efforts of others, making it easier for Oregon to classify certain schemes as securities.
Despite the federal SEC’s decreased enforcement under the Trump administration, individual states like Oregon are asserting their authority to protect investors through their own securities laws. Coinbase attempted to remove the case to federal court, arguing that it involved a substantial question of federal law. However, Oregon’s motion asserts that the state applies its own modified legal test, which differs significantly from federal standards.
Coinbase has dismissed the lawsuit as political theater, with the exchange’s chief legal officer criticizing the Oregon AG for pursuing a patchwork of state regulations that could harm consumers. Oregon is seeking attorney fees and costs from Coinbase, stating that the exchange lacked a reasonable basis for seeking removal.
As this legal battle unfolds, the outcome could have significant implications for the cryptocurrency industry. State courts are bound by their own precedents, meaning that the Oregon District Court may have to interpret the concept of an “investment contract” based on the Pratt test.
Overall, the clash between Oregon and Coinbase underscores the complexity of regulatory oversight in the crypto space and the challenges of navigating the intersection of state and federal laws in this rapidly evolving industry.