SEC Drops 3-Year Lawsuit Against Gemini – Crypto Exchange Scores Major Legal Win

Regulatory thunderstorm clears for one of crypto's original players.

The Securities and Exchange Commission just folded its hand against Gemini. After a grueling three-year legal battle, the agency filed to dismiss its lawsuit against the Winklevoss-founded exchange—a stunning reversal that sends shockwaves through the regulatory landscape.

What Changed?

Legal eagles are scrambling. The SEC's sudden retreat—filed without a settlement announcement—hints at either a fatal flaw in their original case or a strategic recalibration. Neither looks good for the agency's broader enforcement crusade.

Gemini's marathon defense, spanning over 1,000 days of filings, motions, and hearings, finally paid off. The exchange never flinched, arguing its products operated outside the SEC's traditional jurisdiction. Now, the court won't get to rule on that core debate.

The Ripple Effect

This isn't just a win for Gemini. It's a blueprint. Other exchanges facing similar allegations are undoubtedly dissecting every document, looking for cracks in the SEC's playbook. The agency's 'regulation by enforcement' strategy just hit a major, public setback.

Market observers are calling it a watershed. When a regulator pursues a case for three years only to walk away empty-handed, it questions the entire premise of the fight. It's the legal equivalent of spending a fortune on a siege, then abandoning it as the walls are about to break.

For the crypto industry, it's a shot of adrenaline. A clear signal that well-constructed defenses can withstand the long game. For the SEC, it's a quiet, expensive lesson—another line item in the budget for lawsuits that ultimately go nowhere, funded by taxpayers who probably just want clear rules instead of courtroom drama.

SEC Vs Gemini

In January 2023, the SEC instituted one of the most controversial crypto-related lawsuits against Gemini Trust Company and its partner, Genesis Global Capital LLC, accusing both parties of illegally offering and selling unregistered securities through the Gemini Earn lending program, a financial product that operated between 2021 and 2022, which allowed customers to lend crypto for interest at 7.4% per annum. 

Following the FTX crash in 2022, Genesis, which had a significant financial exposure to the now-defunct crypto exchange, halted withdrawals on the Gemini Earn Program, effectively locking up $940 million in investor assets. Since then, a series of events has unfolded, including Genesis entering bankruptcy proceedings, and through that process, all Earn investors ultimately recovered 100 percent of their crypto assets in kind. In addition, Gemini has settled related matters with state and federal regulators, paying over $50 million in civil fines. 

In the joint stipulation filed this week, the SEC noted that its decision to seek dismissal “in the exercise of its discretion” took into account the full investor recovery and those regulatory settlements. The dismissal is with prejudice, preventing the SEC from re-filing the same claims, and represents the formal end of one of the most high-profile enforcement actions in the US crypto industry.

US Crypto Regulatory Turnaround

The dismissal of the Gemini case comes amid a broader recalibration of the US crypto regulatory approach under the Donald TRUMP administration. Several high-profile SEC actions against major platforms, involving Coinbase, Kraken, and Binance, have been dropped or paused, reflecting a shift from a forceful regulatory approach seen under the former chairman, Gary Gensler. 

At the same time, Congress and the WHITE House continue to pursue pro-crypto legislative and policy initiatives. In July 2025, US President Donald Trump signed the GENIUS Act into law, a landmark bill establishing a comprehensive federal framework for stablecoins, aimed at boosting consumer protection and supporting broader adoption of digital assets.

Alongside the GENIUS Act, the highly anticipated Clarity Act, passed by the US House, aims to delineate regulatory responsibilities between agencies like the SEC and the Commodity Futures Trading Commission (CFTC) based on how digital assets function. The US Senate Agriculture Committee is set to observe a markup session of the bill on January 27, indicating steady progress despite recent concerning events, including public outrage by Coinbase founder Brian Armstrong and the Banking Committee’s continued postponement of its own hearing session.