New Jersey Ordered Celsius to Halt Crypto-Yield Accounts as Texas Opened Case

New Jersey’s Bureau of Securities ordered Celsius Network LLC on September 17, 2021 to stop offering and selling its interest-bearing cryptocurrency products in the state, effective November 1, 2021. Texas regulators filed a separate notice that day seeking an administrative cease-and-desist order against Celsius and scheduling a hearing for February 14, 2022.

The actions mattered because both states applied securities-registration requirements to accounts marketed as a way to earn returns on deposited cryptocurrency. The regulators’ position was that attaching an account to bitcoin, stablecoins or other digital assets did not remove it from conventional securities law. These were administrative findings and allegations at that stage, not a court judgment or a nationwide federal prohibition.

How the Earn Rewards accounts worked

According to the state filings, customers transferred eligible cryptocurrency into Celsius’s Earn Rewards program. Celsius’s terms gave the company legal and beneficial ownership of those assets while they were loaned to it and allowed Celsius to commingle, lend, pledge, trade or otherwise deploy them. Customers received variable rewards, generally paid weekly in the deposited asset; CEL-token rewards were subject to jurisdictional restrictions.

Texas characterized the accounts as investment contracts, notes or evidences of indebtedness under its Securities Act. New Jersey likewise found that the products were securities offered without registration or an applicable exemption. Celsius had described the arrangement as lending digital assets to the company in exchange for financing fees, but the regulators focused on customers’ transfer of control and reliance on Celsius’s revenue-generating activities.

That distinction was institutionally important. The dispute was not about whether an individual cryptocurrency was itself a security. It concerned the legal character of an intermediary’s account and its promise to generate a return using customer assets.

The scale and the stated risks

Alabama’s Securities Commission had entered a related show-cause order on September 16, 2021, giving Celsius 28 days to explain why a cease-and-desist order should not follow. That filing said Celsius held the equivalent of more than $14 billion through Earn Rewards accounts as of August 18, 2021 and had advertised returns of up to 17.78% annual percentage yield.

Those figures came from regulatory filings drawing on Celsius’s representations and offering materials; they were not independent audits of assets, liabilities or customer balances. The maximum advertised rate also applied only to certain assets and should not be read as the return available on every deposit.

Texas supplied a narrower geographic snapshot. Its notice said that, as of June 9, 2021, Celsius had more than $344 million under management from more than 9,000 Texas residents and businesses. The notice also alleged that Celsius had continued offering the accounts after the Texas Enforcement Division warned the company on or about May 14, 2021 that its products might not comply with state law.

The regulators emphasized that the accounts were not protected by Federal Deposit Insurance Corporation, Securities Investor Protection Corporation or National Credit Union Administration coverage. That did not establish that losses had occurred by September 17. It established that the protections associated with insured bank or credit-union deposits and covered brokerage custody did not apply to the Celsius product.

What the actions did—and did not—settle

New Jersey issued an operative order with a future effective date. Texas initiated a contested administrative process and expressly allowed Celsius to present evidence at the scheduled hearing. Texas also stated that its notice did not prevent Celsius from paying returns to existing clients, refunding principal or otherwise dealing lawfully with existing customers.

Celsius told CoinDesk that it disagreed with the allegations, maintained that it had complied with the law and reported no immediate change to customer services. That was the company’s contemporaneous position, not an adjudicated resolution.

The defensible conclusion on September 17 was therefore limited but significant: multiple state securities regulators were asserting jurisdiction over crypto interest accounts based on their economic structure, while the final disposition of the contested allegations remained unresolved.