The first state is no longer the first choice for crypto giant company Coinbase.
Coinbase announced Wednesday it had filed with the U.S. Securities and Exchange Commission to redomicile in Texas.
The country’s largest cryptocurrency exchange is currently incorporated in Delaware, which Coinbase chief legal officer Paul Grewal said “left us with little choice” in an op-ed for The Wall Street Journal.
In 2024, 81.4% of initial public offerings chose Delaware to incorporate in, according to an annual report from the state. Delaware owns a total of 2.1 million incorporations, including two-thirds of all Fortune 500 companies.
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An incorporation in Delaware allows a company access to the state’s ubiquitous Chancery Court, the preeminent business court long lauded for its consistent decision-making and expediency.
However, the court controversially decided last year to void a historic Tesla pay package for Elon Musk worth up to $56 billion, finding that Musk and Tesla’s board of directors breached their fiduciary duties by approving the package.
Musk responded by reincorporating Tesla and SpaceX in Texas, setting off a small wave of companies redomiciling out of Delaware, a trend termed “Dexit.”
“Dexit” is still a small movement, and Texas was not the biggest beneficiary this year, Nevada was, earning reincorporations from the likes of Roblox and DropBox. Still, Texas, which became the corporate home of Dillard’s this summer, took several steps in the past two legislative sessions to encourage reincorporations in the Lone Star State.
The Texas Business Court was established in 2023, with judges sworn in a little over a year ago, to challenge the Chancery Court for corporate litigation. It recently took on its most public legal battle yet, with the Dallas Mavericks and Dallas Stars suing each other over the American Airlines Center.
Meanwhile, Senate Bill 29 codified the business judgment rule, which protects directors of a corporation from certain liabilities during litigation, applicable to suits in the Business Court.
Grewal specifically called out these efforts in his op-ed, saying they “enhance [corporate] governance flexibility and legal predictability.”
Reincorporations don’t necessarily have major benefits for average Texans, as they are not tied to headquarters or jobs. Grewal stated that being an incorporation hub brought in more than $1 billion in annual revenue to Delaware, which would take Texas a while to reach. Coinbase itself was a remote-first company with no official headquarters until this year, when it leased 150,000 square feet of office space in San Francisco.
However, as a prong of Gov. Greg Abbott’s agenda to make Texas the ultimate pro-business state, a reincorporation can also signal a company’s allegiance to the state.
Abbott has been a major ally of President Donald Trump, and like Musk, Coinbase CEO Brian Armstrong was a major donor to Trump’s campaign last year.
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