A US federal judge has rejected a joint request by crypto exchange Gemini and the Commodity Futures Trading Commission (CFTC) to overturn a $5 million settlement despite the regulator's own conclusion that it would not have pursued the case under its current enforcement standards.

In a Thursday ruling, US District Judge Alvin Hellerstein held that changes in the CFTC's enforcement priorities and allegations of misconduct within its enforcement division did not justify unwinding the January 2025 settlement.

The decision underscores that a regulator's change of heart is not, by itself, enough to reopen a case both sides had agreed to close — even when that change is accompanied by allegations of problems inside the agency itself.

On May 27, the CFTC and Gemini jointly asked the court to set aside the settlement after an internal review of the agency surfaced allegations of misconduct by its enforcement division, including reliance on a questionable whistleblower, improper regulatory pressure, and efforts to prevent the disclosure of evidence.

The ruling leaves intact a permanent injunction barring Gemini from making false or misleading statements to the CFTC. The settlement also prohibits the exchange from publicly denying the regulator's findings, although the CFTC said in June that it would no longer enforce those restrictions — leaving the injunction formally in force even as the agency has stepped back from its terms.

Gemini has already paid the $5 million penalty, which the CFTC previously told Cointelegraph would not be refunded even if the settlement were overturned.

Judge cites Gemini's decision to settle before trial

The case centered on how Gemini operated its Bitcoin auction. Under the January 2025 consent order, the exchange failed to disclose that some customers traded using borrowed funds, that self-trading had taken place despite safeguards, and that certain traders received special fee arrangements.

Gemini also submitted trading volume data without disclosing that some of the reported activity involved those practices.

Hellerstein said Gemini was already aware of problems with the CFTC's case when it agreed to settle, less than three weeks before trial. Although the exchange later obtained additional internal CFTC documents, the judge ruled that the new material was insufficient to undo a settlement Gemini had voluntarily accepted. For the court, the fact that the agreement was reached with that knowledge carried more weight than the documents obtained afterward.

The judge likewise rejected the argument that President Donald Trump's digital asset executive order and the regulator's new enforcement approach warranted relief, saying they reflected changes in policy rather than a significant change in law. That policy-versus-law distinction anchored the court's refusal to grant relief.

Former CFTC Chair Timothy Massad previously described the regulator's move to reopen a settled case as "extraordinarily unusual," telling Cointelegraph that the public "deserves a better explanation."