Coinbase is escalating its battle with state regulators by asking the U.S. Department of Justice (DOJ) to intervene after federal regulators abandoned their case against the exchange earlier this year. In a 14-page letter sent Monday, Chief Legal Officer Paul Grewal argued that the DOJ should push Congress to pass sweeping preemption measures, preventing states from pursuing enforcement actions against federally regulated digital assets.
“When Oregon can sue us for services that are legal under federal law, something’s broken,” Grewal said on X, describing the current state-level enforcement as “government run amok.”
The dispute stems from an April lawsuit by Oregon Attorney General Dan Rayfield, who accused Coinbase of selling unregistered securities to state residents. The allegations mirrored those made in a federal case by the Securities and Exchange Commission (SEC) — a case the SEC later dropped in February. Since then, other states, including Vermont, South Carolina, and Kentucky, have filed similar enforcement actions.
Rayfield defended the lawsuits by saying that states “must fill the enforcement vacuum being left by federal regulators who are giving up under the new administration.” Coinbase, in turn, moved the Oregon case to federal court and filed a separate lawsuit against Governor Tina Kotek, alleging the state changed its stance on crypto without public input. That case has a status hearing scheduled for Oct. 29.
The timing of Coinbase’s DOJ letter coincides with progress in Congress on digital asset market structure legislation. The U.S. Senate Banking Committee is expected to soon vote on a bill that will delineate the responsibilities of the SEC and the Commodity Futures Trading Commission (CFTC) over crypto assets. Grewal urged the DOJ to support the bill and push for provisions that explicitly preempt state “blue-sky laws,” exempt federally regulated digital assets from new state licensing, and apply the rules retroactively.
Such measures would centralize crypto oversight at the federal level, curbing state-level authority and potentially ending the patchwork enforcement environment that Coinbase and other firms have faced.
While Coinbase faces no active federal cases, it remains locked in litigation with multiple states and has pursued Freedom of Information Act requests targeting former SEC Chair Gary Gensler. The exchange appears determined to force clarity on crypto regulation through both legal and political channels.
For investors, the clash illustrates the uncertain landscape of U.S. crypto policy. If Congress adopts preemption and clarifies regulator roles, firms like Coinbase could see reduced compliance risk and stronger footing for expansion. But until then, state-level enforcement will continue to pose material legal risks for the industry.
