BlockFi faces tough road to listing as it is accused of violating securities laws by Alabama, New Jersey, and Texas consecutively

The cryptocurrency financial services company BlockFi has been accused of conducting unregistered securities trading by regulatory agencies in Alabama and New Jersey, with the Texas State Securities Board following suit. They have deemed BlockFi's interest account (BIA) as a security under the law. The Texas State Securities Board (TSSB) has issued a cease and desist order against BlockFi, BlockFi Trading, and BlockFi Lending.

According to an investigation by the Texas State Securities Board, BIA has promised to reward cryptocurrency depositors with high-interest payments, accumulating over $15 billion as of March 31. The Texas State Securities Board stated in its filing for a cease and desist order that it notified BlockFi of alleged violations on April 20, 2021.

This move to determine the legality of securities trading in the cryptocurrency space represents the latest crackdown by authorities. Previously, it was Binance facing global scrutiny, and now the US is cracking down on its own cryptocurrency enterprises.

Joe Rotunda, director of the TSSB, mentioned that the cease and desist action will not take effect until a judge signs off at a hearing scheduled for October, allowing BlockFi to continue its operations until the hearing.

Prior to the cease and desist order in Texas, BlockFi had already been charged by the state of New Jersey for violating state securities laws and was given until July 29 to respond. If no settlement is reached, the state may halt new account registrations for BIA.

In response to these allegations, BlockFi reiterated in a tweet: "Our position has not changed—BlockFi Interest Accounts are not securities."

[1/1]We are aware of the show cause order issued by the Alabama Securities Commission. We have active dialogues with regulators worldwide, including those in Alabama, to share details about our products, which we believe are lawful and appropriate for crypto market participants.

— BlockFi (@BlockFi) July 21, 2021

For over a year, BlockFi has been actively working towards going public. Initially aiming for a listing within 12 to 18 months, BlockFi is set to conclude its Series E funding on July 27, raising $500 million. Post funding, BlockFi's valuation is expected to reach $4.75 billion.

However, with increasing scrutiny from state regulators, the timeline for going public may be delayed.

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