The SEC and Gemini have reached a preliminary settlement to resolve the long-running lawsuit over the exchange’s Earn program, signaling a potential shift in the United States’s regulatory approach toward crypto lending products.
Long-Running Dispute Nears Closure
Nearly three years after the U.S. Securities and Exchange Commission (SEC) first targeted Gemini Trust over its high-yield Earn program, the two sides appear to be moving toward a final resolution. A filing in the U.S. District Court for the Southern District of New York confirmed that both parties had reached a “resolution in principle” to end the litigation. The agreement, however, still requires approval by the commission before it can be finalized.
In their joint filing, lawyers for the SEC and Gemini requested that ongoing litigation be stayed indefinitely, with a commitment to update the court if the matter is not resolved by December 15.
Background of the Case
The SEC launched its case in January 2023, accusing Gemini Trust and its partner, Genesis Global Capital, of offering unregistered securities through the Earn program. The product, introduced in 2021, allowed U.S. retail investors to deposit Bitcoin and other cryptocurrencies with promises of up to 7.4% annual returns. By late 2022, Earn had attracted about $900 million across 340,000 accounts.
The complaint alleged that Gemini and Genesis failed to properly register the offering under U.S. securities laws, exposing investors to unrecognized risks. Genesis later filed for bankruptcy, leaving Earn users locked out of funds. Gemini has since pledged to return roughly $1.1 billion to program participants, contingent on the outcome of Genesis’s restructuring.
Earlier Developments and Related Settlements
In February 2024, the SEC and Genesis reached a $21 million settlement, narrowing the scope of the regulator’s enforcement push. Around the same period, Gemini received a notice that the SEC would not pursue additional enforcement actions in a separate investigation.
The preliminary settlement now reached with Gemini signals what could be one of the final steps in winding down the high-profile dispute. If approved, it would address the central allegation that the Winklevoss brothers’ firm failed to register its crypto-lending product before marketing it to retail investors.
Wider Industry Implications
For the crypto sector, the Gemini case has been closely watched as a test of how U.S. regulators approach yield-bearing digital asset products. The Earn program’s collapse coincided with broader market turmoil in 2022, which heightened scrutiny of staking, lending, and other interest-generating offerings.
The resolution may mark a shift in regulatory tone. Instead of pursuing open-ended enforcement actions, the SEC could be signaling an intention to establish clearer rules around crypto lending. Still, the case underscores the compliance risks that exchanges face when offering products resembling securities without formal registration.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice
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