Oregon's Attorney General is Suing Coinbase

Oregon's Attorney General is planning to file a lawsuit against cryptocurrency exchange Coinbase. That is according to the company's chief legal officer, Paul Grewal

Oregon Attorney General is planning to sue cryptocurrency exchange Coinbase, according to the company’s chief legal officer, Paul Grewal.

In a post on X, formerly known as Twitter, Grewal said that the state is "resurrecting the dead" by filing a case similar to the one dropped by the U.S. Department of Justice.

"Today the Oregon AG is resurrecting the dead by bringing a copycat case of @SECGov’s 2021 enforcement action against Coinbase, which the SEC dismissed with prejudice," Grewal wrote. "This type of political jockeying is an embarrassing waste of Oregon taxpayer dollars."

The case will reportedly allege that Coinbase is selling unregistered securities to residents of the state. It comes the same day as one of its employees, Jesse Powell, has been targeted for a provocative post that implied new cryptocurrency tokens can be used for facilitating sex trafficking.

Powell runs Base, an Ethereum-based blockchain that allows developers to create cryptocurrency tokens and related apps. One of the new tokens, announced earlier this year, is being used for a copycat version of the social media platform.

However, as one user pointed out, the juxtaposition of the two topics in Powell's post will likely be lost on those who follow him for cryptocurrency news.

"Is this a fever dream?" asked Jacquelyn Melinek. "What the hell is going on at @base? And before you ask, yes, these are real pics."

The comments were seen as undermining the industry's credibility as it has sought for years to distance itself from allegations that crypto is used primarily for illicit activities, including pump-and-dump schemes.

Coinbase has styled itself as a reputable actor in the space, arguing that cryptocurrencies are here to stay, and regulators should focus less on law enforcement by action and instead create clearer regulations for the industry.

But Coinbase has also allowed a flurry of tokens to trade on its platform, and its Base platform has faced controversy for enabling new tokens to launch that have quickly surged in value only to collapse in what industry parlance is called a "rug pull." Powell believes that “tokenizing” internet content will allow creators to better monetize their content than platforms like YouTube and TikTok. Effectively bringing back the idea of NFTs by allowing creators to buy and sell speculative tokens against their content.

Among other potential regulations, the Securities and Exchange Commission could require issuers to “lock up” any tokens they hold in reserve for a set period of time, alleviating the sudden market crashes shortly after a new token is issued sees its price run up in short order. It could also require issuers to hold insurance to account for any lawsuits.

But the Justice Department recently signaled it will stop going after cryptocurrency businesses, instead focusing its efforts on combating crime facilitated using crypto, like drug trafficking.

Other companies like Robinhood have leaned heavily into cryptocurrency and gambling contracts based on the blockchain. That company in particular earns more money on cryptocurrency and options trading than traditional stocks, skewing the incentives towards encouraging users to gamble on short-term bets.

Despite a seemingly more relaxed regulatory environment towards crypto under the Trump administration, Coinbase stock is down 31% this year. Insiders believe that the erasure of gains made last year is due to the broader economic climate. It turns out that cryptocurrencies may not be a hedge against traditional finance as many proponents believed. When people’s dollars do not go as far, they will sell their crypto to pay for basic essentials instead.

Still, the Trump administration remains much more favorable to crypto than ever before. It has dropped a multitude of lawsuits against companies in the industry, created a “reserve” of bitcoin seized through criminal enforcement, and recently commuted the sentences of the founders of exchange BitMEX, who were accused of enabling criminals to launder money through the platform without conducting identity checks. Justin Sun, a controversial founder in the industry, saw a civil case against him filed by the Securities and Exchange Commission was dropped not long after investing $75 million into a token created by the Trump family’s World Liberty Financial.

Cryptocurrency remains one of the least productive investments in the technology industry in some time, insofar as it fails to create any meaningful utility for the average person. Stablecoins offer some promise to enable faster online transactions that bypass the slow traditional banking system and enable more people to transact in currency pegged to the United States dollar. But issues around money laundering and crime remain prevalent, and any products with “utility” remain kludgy and hard to use. New cryptocurrencies based on hazy promises continue to defraud everyday consumers as well. Critics believe that the industry plowed hundreds of millions of dollars into Trump’s campaign in a bid to keep the prices going up, as cryptocurrencies still amount to not much more than gambling.