By suing Genesis Global Capital and Gemini Trust over Gemini Earn in 2023, the SEC is years late to addressing the crypto lending product marketed as a security
Earn — Well, of course: … We covered this in 2021, when Coinbase Global Inc.'s similar crypto lending program was shut down by the SEC before it started.
Context & Ripple Effects
The SEC's case against Genesis Global Capital and Gemini Trust did not arrive in a vacuum: the agency had already halted Coinbase Global Inc.'s near-identical interest-bearing lending program in 2021 before it launched, so the legal theory that retail crypto yield accounts are securities was on record well before Gemini Earn took in customer funds. Private plaintiffs had also moved first, filing an investor suit against Gemini and the Winklevoss brothers in December 2022 alleging the Earn accounts were unregistered securities.
What changed by January 2023 is that the regulator finally acted — charging both firms with offering and selling unregistered securities to retail investors — only after Genesis's collapse left Earn customers stranded. The arc since then runs through the partners turning on each other, with Gemini suing Genesis over more than $1.6B in pledged GBTC shares and Genesis countersuing to recover $689M, before the SEC ultimately settled the Gemini Earn registration case in 2025.
First-order effects
- Genesis Global Capital and Gemini Trust now face unregistered-securities charges from the SEC on top of the December 2022 investor suit, while retail Earn depositors' funds are frozen inside Genesis's distress rather than recoverable on demand.
Second-order effects
- With the regulatory shield gone, Gemini and Genesis convert their commercial dispute into litigation — fighting over the GBTC shares pledged as Earn collateral and alleged preferential transfers — which pushes recovery for Earn customers into bankruptcy-court queues instead of product withdrawals.
Third-order effects
- Enforcement arriving only after a lender's failure, as with Earn and the earlier Coinbase shutdown, cements a regulate-by-lawsuit model for crypto yield products: platforms must treat every interest-bearing retail offering as presumptively a security until a registration path exists, and the 2025 settlement becomes the template price of getting one wrong.
The trend: Crypto lending is being policed through after-the-fact securities enforcement rather than pre-launch rules, leaving retail yield products to launch at their own legal risk.