Five US states continue to pursue lawsuits against Coinbase’s staking program, with company executives claiming that this has created barriers for users seeking to earn rewards through the platform, reaching more than $90 million since 2023.
According to Coinbase’s Chief Justice Officer Paul Grewal, California, New Jersey, Maryland, Washington and Wisconsin I’m maintaining it Proactive legal action on Coinbase’s staking services as of April 25th.
Four states, California, New Jersey, Maryland and Wisconsin, have issued suspension orders prohibiting Coinbase from providing staking to new users within their jurisdictions. There is a continuing lawsuit in Washington, but there is no aggressive ban.
The enforcement action stems from allegations that Coinbase’s staking services constitute an unregistered securities offering.
The crypto company challenges these allegations, claiming that the staking service does not meet the legal definition of securities. In February, the Securities and Exchange Commission (SEC) dismissed a dangerous lawsuit claiming to be biased against Coinbase.
Illinois, Kentucky, South Carolina, Vermont and Alabama have also withdrawn similar lawsuits.
User impact and lost rewards
Coinbase vice president of legal affairs Paul Vanreck estimates that residents of California, New Jersey, Maryland and Wisconsin collectively missed staking rewards of more than $90 million since June 2023.
April 25th articleVangreck noted that suspension orders against Coinbase were issued using emergency procedures that are usually booked in the case of serious securities fraud, such as the Ponzi scheme.
He said restrictions will affect consumer choices and contribute to the uncertainty of regulation in the broader digital asset industry.
Vangreck further emphasized that Coinbase operates under widespread federal and state regulations. The company is registered with Fincen as its Money Services business, holds 46 state money transmission licenses and is published in the United States, subject to regular financial disclosures.
Additionally, we maintain a security commitment that includes compensation for losses caused by Coinbase when there is a low probability of unstable failure.
Van Reck argued that the continuing lawsuits by the five states contradicted a wider trend towards clarity in regulations. He referenced on the ongoing efforts by Congress to establish a comprehensive digital asset framework, noting that regulators, including the SEC, are showing a move towards a more balanced approach.
Van Reck added that the court should not be the appropriate venue for determining staking policies, but that elected officials define the legal status of staking services.
Coinbase has challenged the remaining lawsuits and has pledged to defend users’ access to staking services.
