Coinbase Urges DOJ to Block Conflicting State Crypto Rules

Coinbase is pressing the US Department of Justice to step in and stop individual states from enforcing crypto regulations that clash with national policy.

In a formal letter, the exchange asked federal authorities to preempt state laws it says are stifling innovation and hurting consumers.

Coinbase CLO Slams State-Level Crypto Patchwork

Chief Legal Officer Paul Grewal criticized what he described as a confusing patchwork of state-level crypto rules, accusing states of relying on broad and inconsistent interpretations of securities law.

He pointed to Oregon’s ongoing lawsuit against Coinbase as a prime example of the problem.

“When Oregon can sue us for services that are legal under federal law, something’s broken,” Grewal said on social media, arguing that the current regulatory setup hampers progress and adds legal risk for businesses.

Oregon Attorney General Dan Rayfield filed suit against Coinbase in April, accusing the exchange of promoting unregistered securities in the state.

This came just two months after the SEC dropped its own case against the company, which had alleged that Coinbase operated as an unregistered broker and exchange.

In 2024 @SECGov squeezed >$600M in fines because firms didn't keep texts as required by their rules for keeping records-specifically texts. Today they told a federal judge that in 2023 they didn't understand that our FOIA demands for records included … texts. This is a complete… pic.twitter.com/8sM3TNRZpL

— paulgrewal.eth (@iampaulgrewal) September 17, 2025

Rayfield defended the action, stating that federal regulators were retreating from enforcement under the new administration and leaving gaps that states are now forced to fill.

Coinbase is pushing back. In June, the company escalated the Oregon case to federal court and filed a separate lawsuit in July targeting Governor Tina Kotek, challenging the state’s authority in the matter.

In its letter, Coinbase called on the DOJ to support federal legislation that would override conflicting state rules.

Grewal cited pending bills like the CLARITY Act and the Responsible Financial Innovation Act as possible solutions that could deliver long-awaited clarity for the crypto industry.

Coinbase Struggles to Stay Ahead of the Race

As reported, Coinbase is racing to stay ahead of a wave of new competitors as it pivots from being a pure crypto exchange to a broader financial services platform.

Founded in 2012, Coinbase entered the S&P 500 this year and now boasts a market cap of $83 billion.

Its shares have surged 70% since Donald Trump’s election, thanks in part to his administration’s crypto-friendly stance.

However, second-quarter earnings disappointed, and the stock dropped 15%, signaling investor caution.

A growing concern is the company’s exposure to the price of Bitcoin. Trading fees, still the core of Coinbase’s revenue, rise and fall with crypto market volatility.

Fee compression and competition from Asian exchanges are also eating into its margins.

Coinbase has secured its position as custodian for eight of the top 11 US Bitcoin ETFs, earning $43 million in the last quarter of 2024 from that alone.

However, new legislation could open the door for traditional custodians like State Street and BNY Mellon to enter the market, threatening Coinbase’s dominance.

The firm is also eyeing tokenized stock trading and small business banking services, while leaning heavily into stablecoins and staking.

Revenues from its USDC stablecoin partnership with Circle now trail only trading, while staking offers high-margin returns and defensibility.

In its boldest move yet, Coinbase acquired crypto derivatives platform Deribit for $2.9 billion, signaling its intention to dominate that space.

The company has also partnered with banks like JPMorgan and PNC to bridge crypto and traditional finance.