SKN | Judge Rejects CFTC and Gemini Bid to Overturn $5 Million Settlement

Key Points

• A federal judge rejected Gemini and the CFTC’s joint request to vacate a $5 million settlement reached in January 2025.
• The court ruled that alleged misconduct by CFTC enforcement officials and shifts in regulatory priorities were insufficient to justify reversing the agreement.
• The settlement’s permanent injunction remains in place, and Gemini’s previously paid $5 million penalty will not be refunded.

A US federal court has rejected an unusual effort by the Commodity Futures Trading Commission (CFTC) and cryptocurrency exchange Gemini to reverse a settled enforcement case, leaving the $5 million penalty and key restrictions on the company intact. The decision highlights the legal limits of changing regulatory priorities, even as US authorities reconsider their approach to digital asset enforcement.

US District Judge Alvin Hellerstein ruled Thursday that allegations of misconduct within the CFTC’s enforcement division and changes in the agency’s approach to cryptocurrency regulation did not provide sufficient grounds to overturn the settlement reached in January 2025.

The ruling comes after the regulator and Gemini jointly asked the court on May 27 to vacate the agreement. An internal agency review had raised concerns about the handling of the case, including alleged reliance on a questionable whistleblower, improper regulatory pressure and efforts to prevent evidence from being disclosed.

Despite those allegations, the court concluded that the circumstances did not justify undoing a settlement Gemini had voluntarily accepted.

Court Upholds Settlement Despite Misconduct Allegations

The decision preserves the settlement’s permanent injunction prohibiting Gemini from making false or misleading statements to the CFTC. The agreement also bars the exchange from publicly denying the regulator’s findings, although the CFTC said in June that it would no longer enforce that restriction.

Gemini has already paid the $5 million civil penalty. The CFTC previously indicated that the payment would not be refunded even if the settlement were overturned, leaving the exchange without a financial recovery following Thursday’s decision.

The joint request had raised questions about whether newly disclosed information concerning the regulator’s conduct could undermine an enforcement agreement after it had been finalized. The court ultimately found that the circumstances did not meet the standard required to reverse the settlement.

Bitcoin Auction Practices at the Center of the Case

The original enforcement action focused on Gemini’s operation of a Bitcoin auction and the information it provided to the CFTC.

Under the January 2025 consent order, the regulator found that Gemini failed to disclose several practices relevant to the auction’s trading activity. These included customers trading with borrowed funds, instances of self-trading despite safeguards, and special fee arrangements offered to certain traders.

The exchange also submitted trading-volume data without disclosing that some of the activity involved those practices.

Judge Hellerstein emphasized that Gemini was already aware of problems with the CFTC’s case when it agreed to settle, less than three weeks before trial. Although the company later obtained additional internal agency documents, the judge determined that the newly available information was insufficient to undo the agreement.

The ruling places weight on Gemini’s decision to settle before trial rather than continue contesting the allegations in court. The subsequent emergence of concerns about the regulator’s conduct did not, in the judge’s assessment, automatically invalidate that decision.

Regulatory Policy Shifts Do Not Override Court Agreements

The court also rejected the argument that President Donald Trump’s digital asset executive order and the CFTC’s evolving enforcement priorities justified relief from the settlement.

Hellerstein characterized those developments as changes in policy rather than a significant change in the law. The distinction matters because a regulator’s decision to pursue fewer enforcement actions, or to reassess earlier cases, does not necessarily provide a legal basis for reopening a finalized agreement.

The episode illustrates the tension between shifting federal cryptocurrency policy and the durability of existing enforcement outcomes. Even when a regulator reassesses its previous conduct, reversing a settlement remains subject to judicial review and established legal standards.

Former CFTC Chair Timothy Massad previously described the agency’s attempt to reverse a settled case as “extraordinarily unusual” and said the public deserved a better explanation. His comments reflected the exceptional nature of a regulator joining a defendant in seeking to undo an agreement reached in its own enforcement proceedings.

Outlook

The ruling leaves Gemini’s $5 million settlement and associated injunction in place, despite the CFTC’s reassessment of its enforcement approach. For cryptocurrency companies, the decision reinforces that changing regulatory priorities do not automatically erase earlier settlements or penalties. Any effort to revisit such agreements will continue to depend on the specific facts, the applicable legal standards and the court’s assessment of whether sufficient grounds exist for relief.