Five US states are persistently pursuing legal action against Coinbase’s staking program, leading to a complex situation where users are potentially missing out on over $90 million in rewards since 2023. Coinbase’s top legal mind, Paul Grewal, highlights that California, New Jersey, Maryland, Washington, and Wisconsin are at the forefront of this legal challenge as of April 25.
In particular, California, New Jersey, Maryland, and Wisconsin have issued directives that stop Coinbase from offering staking to new customers in their states. Meanwhile, Washington continues its lawsuit without imposing any direct prohibition.
These legal steps originate from the accusation that Coinbase’s staking offerings are essentially unregistered securities. Coinbase has refuted these claims, insisting that their staking services don’t fit the securities definition. Notably, the US Securities and Exchange Commission (SEC) concluded its staking-related lawsuit against Coinbase favorably for the company earlier in February.
Several other states, including Illinois, Kentucky, South Carolina, Vermont, and Alabama, have decided to retract similar legal complaints.
### Impact on Users and Missed Opportunities
Coinbase’s vice president of legal, Paul VanGreck, calculates that residents in California, New Jersey, Maryland, and Wisconsin have collectively foregone over $90 million in staking rewards since June 2023. VanGreck criticizes the use of emergency cease-and-desist orders—measures typically reserved for severe securities fraud cases—for staking activities, arguing it’s a misapplication. He believes these restrictions not only limit consumer options but also add to the regulatory ambiguity in the digital asset sector.
VanGreck underscores Coinbase’s adherence to stringent regulations, noting its registration with FinCEN and its possession of numerous state money-transmission licenses. Furthermore, Coinbase’s commitment to security, including indemnification for users against unlikely staking failures, demonstrates its dedication to user safety.
He suggests that the ongoing litigation from these five states is out of step with a growing trend towards clearer regulatory guidelines. VanGreck advocates for a legislative, rather than judicial, determination of staking services’ legal standing, aligning with broader efforts to create a comprehensive digital asset regulatory framework.
Coinbase remains committed to challenging the ongoing lawsuits to safeguard user access to staking services.
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