BlockFi Faces Crackdown by a Third US State, Texas.

In the latest blow to the crypto lender's business model, Texas officials claimed on Thursday that BlockFi's Interest Account (BIA) product is a security under state rules.

BlockFi, BlockFi Trading, and BlockFi Lending have been served with a cease-and-desist order by the Texas State Securities Board (TSSB). The cease-and-desist order hasn't gone into effect yet, and it won't until a court signs it at a hearing in October, according to CoinDesk. The filing allows the corporation to reply to the charges in writing. Until the hearing, the company is allowed to continue operating.

TSSB Director of Enforcement Joe Rotunda remarked, "This legal action gives BlockFi and its affiliates the opportunity to reply to our charges and offer admissible proof." CoinDesk received a copy of the warning from him.

BlockFi would be prohibited from marketing its BIA product without first registering with the state's securities authority, according to the proposed cease-and-desist order.

Texas has joined Alabama and New Jersey in accusing the crypto lending platform of violating state securities laws with its interest-bearing product.

While a spokesperson for the company could not be reached for comment right away, following the publication of this article, the company tweeted, "we firmly think that the BIA is lawful."

Texas, like New Jersey, is alleging that the fact that clients entrust their cryptocurrencies to BlockFi for investment and commingling with other customer and corporate funds may violate the state's securities laws.

“The BIAs constitute investment contracts, notes, or evidences of indebtedness that are regulated as securities as that term is defined by  Section 4.A of the Securities Act,”  according to the petition.

In late April, Texas alerted BlockFi that its lending product might be in violation of state securities laws. TSSB alleged that the lender continued to illegally offer BIA in Texas.

TSSB said, BlockFi has at least 25,000 clients in Texas with a total asset value of $691 million.

BlockFi responded to Alabama's regulator's charges by saying that its interest accounts aren't securities in a tweet.