Gemini, led by the Winklevoss twins, has successfully navigated the scrutiny of the U.S. Securities and Exchange Commission (SEC), as the agency has closed its investigation after nearly two years. The decision not to pursue enforcement action against Gemini comes 699 days after the start of the investigation and 277 days after issuing a Wells Notice.
The investigation into Gemini was initially launched in January 2023 alongside Genesis Global Capital over the now-defunct Earn program. The SEC alleged that the program involved the sale of unregistered securities, allowing users to lend crypto assets in exchange for yield. However, the program collapsed when Genesis halted withdrawals during the 2022 bear market.
While the case against Gemini has been closed, the SEC made it clear that this is not an official exoneration and left the door open for potential future action. Co-founder Cameron Winklevoss sees this as a milestone in ending the “war on crypto” but acknowledges the significant financial burden and setbacks endured by the industry throughout the investigation.
In response to the regulatory challenges faced by crypto companies, Winklevoss proposed several measures to prevent future crackdowns. He suggested that companies caught in regulatory battles should be reimbursed three times their legal costs if an agency fails to establish clear rules before launching an investigation. Additionally, he advocated for a “dishonorable discharge” policy, where SEC officials involved in baseless enforcement actions would be publicly fired and banned from holding government positions.
Winklevoss also called for an agency ban, proposing that regulators who abuse their power should be permanently barred from government positions. He specifically targeted former SEC chair Gary Gensler, whose aggressive stance against the crypto industry led to over 100 enforcement actions since 2021. Gensler’s approach, criticized as “regulation by enforcement,” resulted in legal battles with major firms like Coinbase, Binance, Ripple, and Kraken.
Since Gensler’s departure in January, the SEC has started to ease its approach towards crypto litigation. In February, the agency closed investigations into Coinbase, OpenSea, Uniswap Labs, and Robinhood Crypto. This shift in regulatory tone signals a potential change in the industry’s relationship with regulators moving forward.