3 U.S. States Say BlockFi’s Interest-Bearing Accounts Violate Securities Laws

  • New Jersey, Alabama, and Texas have increased regulatory pressure on BlockFi.
  • The states claim BlockFi’s interest Accounts (BIAs) are unregistered securities and violate state laws.
Judge Gavel and law book on a black wooden background


Cryptocurrency platform BlockFi is facing increased regulatory scrutiny in three U.S. states, all of which claim that the company’s BlockFi Interest Accounts (BIAs) may be unregistered securities offerings. BIA enable users to deposit their cryptocurrencies and earn interest on their funds, with rates varying depending on the type of asset deposited.

New Jersey, where BlockFi is headquartered, issued a summary cease-and-desist order on 20 July banning BlockFi from selling “unregistered securities” through its BIAs and accepting new BIAs from New Jersey residents. The state’s Bureau of Securities initiated the investigation due to rising concerns over the proliferation of DeFi platforms in the state, claiming they present a heightened risk of loss to investors.

Zac Prince, the CEO of BlockFi, said the state gave the company an extension and moved the date when the ban would take effect to 29 July. He noted the company has been engaged in an “ongoing and productive dialogue” with all relevant authorities, but maintained the company’s position that BlockFi Interest Accounts aren’t securities. 

On 21 July, the Alabama Securities Commission issued a Show Cause Order to BlockFi, giving the company 28 days to show cause they aren’t selling unregistered securities in the state. The following day, the Texas State Securities Board scheduled a hearing for 13 October to determine whether it would issue a cease-and-desist order against BlockFi. The Board said it had notified BlockFi about its potential violation of the state’s securities laws in April.

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BlockFi to Pay $100M in Penalties Over Interest Accounts
  • BlockFi has agreed to stop onboarding new U.S. customers to its service, though existing U.S. account holders will continue to receive interest payments from the platform.
  • The company will also attempt to bring its BlockFi Interest Accounts into compliance with the Investment Company Act of 1940 within the next 60 days.
BlockFi Received Cease and Desist in New Jersey
  • BlockFi has until the 22 July to comply with the order, and stop onboarding new BlockFi Interest Account (BIA) clients.
  • The firm’s CEO disagreed with the decision, and said BlockFi was “engaged in an ongoing dialogue with regulators to help them understand our products”.