Coinbase joins Tesla in leaving Delaware for Texas: ‘Left us with little choice’

Cryptocurrency exchange Coinbase is departing Delaware and reincorporating itself in Texas, the company said in a regulatory filing on Wednesday, citing the new business hub’s growing attractiveness for innovative companies.

Several companies with a valuation of over $1 billion have moved their legal home out of Delaware since last year, in what some have nicknamed “Dexit.”

Tesla shifted its headquarters to Texas last year in a high-profile relocation, while Trump Media & Technology, the owner of Truth Social, moved its base to Florida in April.

Coinbase, with a market capitalization of nearly $82 billion, according to LSEG, will be one of the largest companies to move base.

“For decades, Delaware was known for predictable court outcomes, respect for the judgment of corporate boards and speedy resolutions,” Coinbase Chief Legal Officer Paul Grewal said in a opinion piece in the Wall Street Journal on Wednesday.

Delaware judges, however, have expanded the court’s most stringent legal standard to a growing range of situations involving controllers, increasing the risk of shareholder lawsuits.

The decisions culminated with the blockbuster ruling last year that rescinded Musk’s $56 billion pay package from Tesla. “Never incorporate your company in the state of Delaware,” Musk had said on X after the ruling.

“It’s a shame that it has come to this, but Delaware has left us with little choice,” Grewal added.

Texas has stepped up efforts to attract cryptocurrency firms, touting regulatory clarity and lower operating costs, with recent legislation positioning the state as a growing hub for blockchain development amid uncertainty in other jurisdictions.

A tale of two immigrations to Colorado and Texas is as follows.

Colorado had a great influx of West Coast immigrants for many years and brought left wing ideology with them. It was and is a beautiful state and they moved because they liked the state and turned it democrat blue. Twenty years ago Colorado was a red state.

Today the immigration from the West Coast is the same to Colorado, it is leftist.

However, today the immigration from the West Coast to Texas and other states is by conservatives fleeing the insanity of California, Oregon and Washington State. In Ted Cruz’s last election they did a survey. The conservative Ted Cruz won a greater percentage of their votes than his opponent Beto.

I always wondered why so many companies incorporated in Delaware.

https://en.wikipedia.org/wiki/Delaware_Court_of_Chancery

The Delaware Court of Chancery is a court of equity in the U.S. state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court. Since 2018, the court consists of seven judges. The court is known for being a hub for corporate governance litigation in the United States, as two-thirds of Fortune 500 companies are incorporated in Delaware. It is among the preeminent business courts in the world.[1]

Many companies prefer to incorporate in Delaware because of the state's corporate-friendly tax system and the Court's historical expertise in business litigation. The Court's judges tend to be longtime members of the Delaware State Bar Association who have spent their careers doing corporate litigation.[2]

Because of the extensive experience of the Delaware courts, Delaware has a more well-developed body of case law than other states, which serves to give corporations and their counsel greater guidance on matters of corporate governance and transaction liability issues. More than two thirds of Fortune 500 companies are incorporated in the state.[3] Delaware is the home to more than 1.8 million corporations, more than the number of residents in the state.

The Court of Chancery handle corporate internal affairs litigation (such as shareholder disputes and merger disputes) according the Delaware General Corporation Law, the statute governing corporations in Delaware. As a result, it is a hub for corporate litigation in the United States.

The Court's jurisdiction is a hybrid of constitutional provisions, statutes, and case law.

According to the Delaware Judicial Information Center:

The Court of Chancery has jurisdiction to hear and determine all matters and causes in equity. The general equity jurisdiction of the Court is measured in terms of the general equity jurisdiction of the High Court of Chancery of Great Britain as it existed prior to the separation of the American colonies. The General Assembly may confer upon the Court of Chancery additional statutory jurisdiction. In today's practice, the litigation in the Court of Chancery consists largely of corporate matters, trusts, estates, and other fiduciary matters, disputes involving the purchase and sale of land, questions of title to real estate, and commercial and contractual matters in general. When issues of fact to be tried by a jury arise, the Court of Chancery may order such facts to trial by issues at the Bar of the Superior Court of Delaware. (10 Del. C., 369).[6]

From a CNBC article two days ago..

Delaware has long been the dominant state for U.S. companies to incorporate due to its flexible corporate code and expert judiciary, and is seen as balancing the rights of executives and shareholders. A Texas state law allows corporations to limit shareholder lawsuits against insiders for breach of fiduciary duty.

Why does the crypto industry need to be protected in this way? It looks like they are admitting that they navigate the gray area in and around 'breaching of fiduciary duty.'

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