Coinbase is intensifying its fight against state-level bans on its staking program, calling on California, Maryland, Wisconsin, New Jersey, and Washington to drop their pending lawsuits. The firm argues that these legal attacks are not only incorrect, but waste millions of dollars of residents’ money. In leading this campaign, Coinbase is raising the profile of the significant losses that come with these bans and the regulatory uncertainty that they create. This follows the SEC abandoning its own lawsuit against Coinbase.

The crux of Coinbase’s argument—which is largely unchallenged by the states—is that the states’ actions are inflicting serious financial harm to their residents. The company expected that residents of California, Maryland, Wisconsin and New Jersey have missed out on around $90 million in staking rewards. These losses stem from the cease and desist orders issued to Coinbase’s staking program in those four states. Coinbase argues that these states are applying their laws against Coinbase’s staking program in an unfairly discriminatory manner while ignoring other staking service providers.

Legal Battles and Regulatory Uncertainty

Coinbase is facing lawsuits in various states for its staking program at this very moment. Five states—Illinois, South Carolina, Alabama, Vermont, and Kentucky—have abandoned their lawsuits against Coinbase. In the interim, though, other states continue to move forward with litigation. Coinbase has previously claimed that these lawsuits have produced regulatory whiplash uncertainty. That’s particularly timely now as the U.S. tries to set clear parameters for the burgeoning crypto industry.

"All but one (Washington) are enforcing cease-and-desist orders that have already cost residents tens of millions of dollars in missed staking rewards, while limiting consumer choice and increasing regulatory uncertainty." - Paul VanGrack, Coinbase Vice President of Legal

In its comments, Coinbase has described these draconian orders as emergency measures. They save such enforcement for dire examples like Ponzi schemes, not examples of well-established, legitimate financial products. The company boldly claims that its staking program is safe and compliant. This level of commitment further supports its position as the industry’s most advanced service provider.

Coinbase's Stance and Future Actions

Coinbase has taken an increasingly aggressive tack in calling for regulatory clarity, especially since the election of President Trump. The company contends it has a clear defense, highlighting its dedication to adhering to regulations and history of safe operations. As we mentioned above, Coinbase continues to maintain that these lawsuits were politically motivated and wrong from the start. For one, it has proactively made its case and educated policymakers on the positive aspects of its staking program.

Paul VanGrack noted Coinbase’s commitment to compliance and safety, making Coinbase a trustworthy staking service provider. He particularly stressed the point that the company has to constantly defend itself against what it believes to be frivolous, baseless lawsuits. Simultaneously, it vigorously seeks to inform policy makers on how unique and beneficial its staking program is.

Impact on US Residents

Coinbase is looking to litigate this overreach by the states. They refer to it as a “war on staking” that hurts U.S. residents in the long run. In response, the company is doing an ad campaign to highlight the financial impacts and restricted consumer choice due to bans. With only a handful of states left pursuing litigation, Coinbase is urging the rest of the states to reconsider their lawsuits. In addition, they want residents to benefit directly from staking rewards.

"It's time for these states to catch up with the SEC—and nearly every other state—and drop their unfounded cases." - Paul VanGrack

As you may know, the SEC recently dropped its lawsuit against Coinbase. This decision is a huge win for the company and further bolsters its argument that its staking program is entirely legitimate and compliant. This dismissal should provide further impetus for states to heed Coinbase’s calls to drop their lawsuits and stop their enforcement actions.