In January, the Securities and Exchange Commission (SEC) in the US filed a lawsuit against Gemini, which the embattled crypto exchange is now trying to get dismissed.
It has urged a federal judge to throw out the said case, arguing that the securities regulator had been unable to establish a clear case of the sale of unregistered securities by the exchange.
The filing
On Friday, lawyers representing Gemini had submitted a filing of 15 pages in which they criticized the argument of the SEC that a loan program and the Gemini Earn program, which generates interest, is categorized as sales to customers.
They said that given the assertions the federal regulator had made so far, it could not prove its case in the court.
The Gemini lawyers said that even if the inconsistent theories of the SEC were to be considered in regard to security, it had not been able to establish the sale of securities, or them being offered for sale.
The SEC had filed a lawsuit against crypto lender Genesis and crypto exchange Gemini on January 12th this year.
It had charged the two organizations for selling unregistered securities to retail clients.
The Master Digital Asset Loan Agreement (MDALA) and the Gemini Earn program had been especially mentioned in the complaint.
As a matter of fact, the regulator categorized them as securities that had been sold to about 340,000 investors.
The debate
Industry players have been bedeviled by the question of whether the existing law declares crypto tokens as securities.
Most have been frustrated with the SEC over its use of enforcement actions and failure to provide regulatory clarity for the crypto sector.
Gary Gensler, the Chairman of the SEC, has claimed that the law is quite clear about the status of crypto tokens.
They have asserted that it is the crypto companies that have refused to accept the law and this has resulted in lawsuits.
Gemini lawyers
The possibility of MDALA and the Gemini Earn program being securities was left open by Gemini attorneys in their filing, but they vehemently denied their sale to customers.
They argued that the loan agreements made in relation to MDALA were not sold to clients on terms that could be counted as securities sales under the law.
Therefore, they said that the SEC was making ‘fundamentally inconsistent’ arguments in this particular area.
As far as the Gemini Earn program is concerned, the attorneys took a more blunt tone in criticizing the US securities regulator.
They said that the allegations of the SEC about the program itself being security did not have any basis in fact.
They called this claim frivolous. The Gemini Earn program gave high interest rates to customers on their crypto investments.
According to the lawyers, earning interest income on invested crypto tokens does not constitute a securities sale, as the assets were borrowed and meant to be returned on demand.
Meanwhile, Gemini is engaged in another legal battle with Digital Currency Group (DCG), the parent company of Genesis.