Genesis, Gemini seek dismissal of SEC lawsuit over lending product

Crypto exchange Gemini and financial services firm Genesis have filed motions to dismiss a lawsuit filed earlier this year by the Securities and Exchange Commission.

The SEC sued the two companies in January, arguing that the Earn program constituted an unregistered offer and sale of securities under U.S. law. 

In a Friday court filing, Genesis argued Earn involved the creation of loans, not securities, contending that the SEC "has not plausibly alleged facts that would transmogrify these loans into either investment contracts or security notes." Similarly, Gemini said in its filing that "the SEC seeks to turn the Earn program into something it was not: the sale of unregistered securities."

The moves to dismiss are unsurprising, and both firms previously pledged to fight the lawsuit. Back in January, Gemini co-founder Tyler Winklevoss tweeted that "We look forward to defending ourselves against this manufactured parking ticket."

The lawsuit represented another leg in the SEC's continued crackdown on the crypto space. SEC Chair Gary Gensler raised red flags about crypto-tied lending in the agency's press release announcing the enforcement action against Genesis and Gemini.

"Today’s charges build on previous actions to make clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws," Gensler said in a press release at the time of the lawsuit's filing.