Danger on the crypto Oregon Trail with 'copycat' lawsuit against Coinbase

It has been said that insanity is doing the same thing over and expecting different results, but that maxim isn't stopping the great state of Oregon, most famous amongst computer nerds for the 1980s hit game the Oregon Trail, from launching a lawsuit against Coinbase alleging securities violations.

The 171 page complaint alleges that Coinbase is violating Oregon’s securities laws by permitting the sale of crypto which doesn't come with 'proper disclosures'. The Oregon Attorney General's press release alleges that Oregon is filling an 'enforcement vacuum' created by the abandonment of cases under the 'Trump Administration'. Oddly, the AG says:

After building trust with Oregon consumers, Coinbase sold high risk investments without them being properly vetted to protect consumers

It's unclear just what cryptocurrencies were sold to Oregon consumers to 'build trust' which presumably weren't 'high risk investments' given nearly all cryptocurrencies are treated as being volatile and high risk. Coinbase has always asserted that they do not list securities for sale on their platform.

Paul Grewel, Chief Legal Officer at Coinbase has said that the lawsuit is a 'copycat' of the SEC proceedings since abandoned at the federal level against Coinbase.

This is a fair critique as it seems 70-80% of the Oregon proceedings have been directly copied from the SEC proceedings, including technical descriptions, asset-specific narratives, and structural organization descriptions. The statistical data and market capitalization figures are precisely replicated.

Mr Grewel said that the Attorney General of Oregon had made clear to Mr Grewel that he was:

picking up where the Gary Gensler's SEC left off

Mr Grewel added:

no lawsuit is harmless. In fact, Oregon’s lawsuit directly undermines constructive policymaking happening in DC.... momentum has never been stronger to pass comprehensive federal legislation for digital assets... Yet instead of waiting for ... Congress to enact clear rules of the road, Oregon has taken it upon itself to try to regulate a worldwide industry through enforcement. 

In the United States, most securities enforcement occurs at the federal level, but states also have securities legislation on their books and most states have their own securities regulators. Meanwhile at the federal level, numerous lawsuits against crypto companies have been dismissed or paused, while the SEC engages with industry to seek to establish a regulatory framework for the industry widely viewed as a reset. That process will continue whether or not any states seek to continue down the fraught road of regulation-by-enforcement, but the distraction of state level cases will not be helpful. By Michael Bacina