Inside Coinbase’s Texas Restructuring: Legal Challenges, Derivative Issues, and Cryptocurrency Regulations

On November 12, Coinbase revealed that it had submitted a filing with the U.S. Securities and Exchange Commission to reincorporate in Texas, with Foley & Lardner LLP acting as legal counsel in Texas.

Following a discussion with Foley & Lardner partners Christopher Babcock and Christopher Converse, the factors contributing to Texas’s growing attractiveness as a corporate domicile become evident.

The partners emphasized that Texas’s appeal is rooted in predictability, specialized adjudication for corporate disputes, and new statutory tools that companies can incorporate into their governance documents, rather than being driven by the motivations of any single company, which Coinbase has addressed in its own communications.

:recalculating:
:recalculating:
:reincorporating:
Farewell Delaware.
Hello Texas.
Who has restaurant recommendations? pic.twitter.com/z9pVnNT8gr

— Coinbase (@coinbase) November 12, 2025

Texas as a Viable Incorporation Option

Babcock and Converse serve as co-chairs of the firm’s Texas Corporate Governance Team. Babcock noted a transition from default selections to careful consideration of governing law, highlighting that the choice of venue has become competitive among states and significant for both management and investors.

“What we have started to observe is a legal landscape where the choice of incorporation is a genuine topic of discussion,” Babcock stated. “Companies must be deliberate about and comprehend the legal frameworks that are suitable for their management, investors, and other stakeholders.”

He characterized Texas’s strategy as the result of a long-term policy initiative rather than a singular reform. “Texas has been engaged in what I would describe as a two-decade, perhaps three-decade effort to truly establish itself as a favorable environment for business,” he remarked.

“It aims to be a location where rules exist. The rules are clear, people can adhere to them, and individuals can invest capital with confidence in their economic ventures,” Babcock added.

Babcock pointed out that Delaware and Nevada continue to be part of companies’ comparative analyses, while Texas emphasizes clarity regarding roles, remedies, and venues, enabling boards to function effectively and investors to depend on enforceable protections.

Business Court and Derivative Threshold

Recent developments include the establishment of the Texas Business Court, which directs internal entity claims to judges with transactional expertise, and an opt-in codification of the business judgment rule that delineates the boundary between overseeing misconduct and reevaluating business decisions.

“We made it abundantly clear that if there is a dispute regarding how the company is governed or the rights of shareholders in relation to the company, that matter can be addressed within the business court, which is a specialized court. It has judges with substantial transactional and relevant experience,” Babcock explained.

He further noted that the statute sets statewide guidelines for judicial deference to board decisions while maintaining avenues for addressing fraud or conflicts.

“Directors possess a better understanding of their mission than courts do. Therefore, we do not want courts to second-guess the business decisions made by directors. We want courts to ensure that directors do not have any inappropriate interests,” he clarified.

Additionally, Texas now allows companies, through their bylaws, to impose a minimum ownership threshold for initiating derivative claims, capped at 3% and expressly aggregable, aimed at discouraging lawsuits from minimal holders while allowing viable claims when shareholders collaborate.

“Texas established a rule that a company can, in its bylaws, set an ownership threshold that can be satisfied by one or multiple shareholders acting collectively to file a derivative claim,” Babcock stated. “It cannot exceed 3% of the company… and it must, by statute, be something that can be achieved by multiple shareholders acting together.”

Today, @Nasdaq issued a statement in support of Texas Senate Bill 29 after @GregAbbott_TX signed the bill into law. This legislation, which codifies the Business Judgment Rule and promotes predictability in corporate governance litigation, enhances Texas’ competitiveness as a… pic.twitter.com/W3NvviON83

— Nasdaq (@Nasdaq) May 14, 2025

He also highlighted a mechanism for pre-approving independent committees before conflicted transactions proceed, ensuring independence is assessed upfront rather than litigated only after capital has been invested.

Coinbase, Foley, and Texas: Counsel Mandate and Future Steps

Discussing the collaborative relationship between Foley & Lardner and Coinbase, Babcock described a mandate focused on Texas legal guidance that facilitated the reincorporation process and establishes parameters for future collaboration, stating, “Our engagement was to assist in reviewing and considering the implications of Texas law, the advantages and disadvantages, and to help them navigate those issues to support what ultimately led to the decision to reincorporate.”

Converse framed the ongoing relationship in practical terms related to corporate status: “[The service is] for this reincorporation. But now that they’re, or assuming they will be a Texas corporation in the future, we would serve as Texas counsel for them moving forward.”

Babcock also provided a general perspective on digital-asset companies evaluating their options, noting existing mining activities, a state digital-asset reserve, and the broader initiative to combine regulatory frameworks with operational flexibility. “I believe Texas is a highly appealing state for digital assets,” he remarked.

In a separate comment made in his individual capacity, Foley & Lardner partner Patrick Daugherty, who leads the Blockchain and Digital Assets practice at the firm and serves as an adjunct professor at Northwestern University Pritzker School of Law, also elaborated on what makes Texas a favorable state for digital assets.

“Thanks to the Texas Blockchain Council and other industry advocates, regulatory clarity in Texas regarding crypto is advantageous for both the industry and consumers and is improving. Crypto is welcomed in Texas, unlike New York, California, and Illinois, which have enacted burdensome laws and regulations that hinder business growth,” Daugherty stated.

“The industry supports politicians and regulators of all affiliations—Republicans, Democrats, and independents alike—who advocate for clear legal standards. The industry opposes politicians and regulators of any affiliation whose interpretation of ‘regulation’ involves enforcing vague standards through investigations and lawsuits,” he concluded.

The post Inside Coinbase’s Texas Reincorporation: Business Courts, Derivative Hurdles and Crypto Policy appeared first on Cryptonews.