Although half of the 10 state-level lawsuits were dismissed earlier this year, Coinbase’s staking program has continued to be prohibited in four states.
Lawsuits against Coinbase’s staking program are still being pursued by five U.S. states, with claims being made by the company’s executives that barriers are being created for users attempting to earn rewards through the platform, which have totaled more than $90 million since 2023.
It has been reported by Coinbase’s chief legal officer, Paul Grewal, that active legal actions against Coinbase’s staking services are being maintained by California, New Jersey, Maryland, Washington, and Wisconsin as of April 25.
Cease-and-desist orders have been issued by four states — California, New Jersey, Maryland, and Wisconsin — prohibiting Coinbase’s staking services from being offered to new users within their jurisdictions, while an ongoing lawsuit has been filed by Washington state without an active ban in place.
The enforcement actions have been prompted by allegations that Coinbase’s staking services are being conducted as unregistered securities offerings.
These allegations, which argue that staking services do not satisfy the legal definition of securities, have been contested by the crypto firm. In February, the staking case against Coinbase was dismissed with prejudice by the U.S. Securities and Exchange Commission (SEC).
Similar lawsuits have also been withdrawn by Illinois, Kentucky, South Carolina, Vermont, and Alabama.
It has been estimated by Coinbase’s vice president of legal, Paul VanGreck, that residents of California, New Jersey, Maryland, and Wisconsin have collectively been deprived of over $90 million in staking rewards since June 2023.
In an April 25 article, it was noted by VanGreck that cease-and-desist orders against Coinbase had been issued through emergency procedures, which are typically reserved for cases involving serious securities fraud, such as Ponzi schemes, and were argued by him to be inappropriate for routine staking activities.
It was stated by him that consumer choice was being affected by the restrictions and that regulatory uncertainty in the broader digital asset industry was being contributed to as a result.
It was further emphasized by VanGreck that Coinbase is operated under extensive federal and state regulations. The company has been registered with FinCEN as a money services business, has been issued 46 state money-transmission licenses, and is publicly traded in the US, where it remains subject to regular financial disclosures.
Additionally, a security commitment is maintained by the company, under which users are indemnified for any losses in the unlikely event that a staking failure is caused by Coinbase.
It was argued by VanGreck that the ongoing litigation pursued by the five states stands in contrast to the broader momentum toward regulatory clarity. Reference was made by him to the efforts currently underway in Congress to establish a comprehensive framework for digital assets, while it was also noted that regulatory bodies, including the SEC, have begun to shift toward a more balanced regulatory stance.
It was further stated by VanGreck that the determination of staking policy should not be left to the courts, as it ought to be defined by elected lawmakers who are responsible for setting the legal framework for staking services.
A commitment has been made by Coinbase to challenge the ongoing lawsuits and to safeguard user access to staking services.
