Coinbase Slams ‘Patchwork’ State Crypto Laws, Calls for Federal Preemption

Coinbase has gone on the offensive against state regulators, petitioning the Department of Justice that a patchwork of lawsuits and licensing schemes is tearing America’s crypto market apart.

“When Oregon can sue us for services that are legal under federal law, something’s broken,” Chief Legal Officer Paul Grewal tweeted on Tuesday. “This isn’t federalism—this is government run amok.”

Coinbase’s filing says that states are “expansively interpreting their securities laws in ways that undermine federal law” and violate the dormant Commerce Clause by projecting regulatory preferences beyond state borders.

“The current patchwork of state laws isn’t just inefficient – it slows innovation and harms consumers” and demands “federal action on crypto market structure,” Grewal said.

States vs. Coinbase

It pointed to Oregon’s securities lawsuit against the exchange, New York’s bid to classify Ethereum as a security, and cease-and-desist orders on staking as proof that rogue states are trying to resurrect the SEC’s discredited “regulation by enforcement” playbook.

Oregon Attorney General Dan Rayfield sued Coinbase in April for promoting unregistered securities, and in July asked a federal judge to return the case to state court after the exchange sought federal jurisdiction.

The letter details constitutional objections to state enforcement, particularly cease-and-desist orders issued by California, Maryland, New Jersey, and Wisconsin against the company’s staking services. These orders took effect immediately without prior hearings.

The filing also points to Maine’s recent actions targeting self-custody wallets, requiring crypto companies to “exhaustively identify” recipients of transfers to unhosted wallets and report that information to the state during investigations.

The crypto exchange says this threatens the core purpose of self-custody – protecting user privacy and autonomy.

Federal and state laws

Ishita Sharma, a blockchain and crypto lawyer and managing partner at Fathom Legal, told Decrypt that “states cannot enact laws that impose undue burdens on interstate commerce or project their policies extraterritorially.

“When New York or Oregon applies their securities laws to assets traded nationwide, it risks violating the principle that states cannot balkanize national markets,” she said.

Sharma pointed out that “several states have issued cease-and-desist orders without giving companies any prior notice or chance to defend themselves,” leaving firms “shut out of major parts of their operations without due process, which the Constitution normally requires.”

Coinbase urged the DOJ to support broad preemption provisions in pending congressional legislation, including the House-passed CLARITY Act and the Senate’s Responsible Financial Innovation Act.

The company wants federal law to supersede state securities laws for digital assets and eliminate conflicting licensing requirements.

A DOJ push for federal preemption, she said, “would be a big turning point” because the Department rarely intervenes unless “the White House wants to reset the balance between state and federal power.”

Such a move, she added, would show Washington intends to treat crypto as a “national economic priority, not something left to scattered state consumer-protection rules.