Coinbase halts retail staking in California, New Jersey, South Carolina, and Wisconsin following SEC complaint. The SEC’s claims that the service qualifies as a security result in state-specific prohibitions being implemented during legal processes.
The SEC’s lawsuit against Coinbase last month classified its staking service and offered currencies as securities. The legal action ensued from this classification. Securities regulators in eleven states began independent legal actions against the site at the same time.
Coinbase strongly refuted the claim that its staking services are securities in a blog post on Friday. Even though the preliminary state orders were issued before Coinbase could raise a defense, the exchange disagrees but has chosen to abide by them.
Customers in the impacted states won’t be able to use the retail staking service during the suspension. The suspension will not affect any crypto assets staked before the issuance of the state orders, though.
The developments in the SEC lawsuit and state actions raise questions about staking services’ regulatory treatment in the Bitcoin industry. Coinbase’s decision to comply with state directives while disputing the security designation highlights compliance challenges for digital asset exchanges. Market participants will closely monitor the situation’s development through court processes for potential sector-wide ramifications.
“We strongly disagree with any allegation that our staking services are securities,” Coinbase wrote in a blog post Friday afternoon. “But we will fully comply with the preliminary state orders where required, even though that comes before we’ve had an opportunity to defend ourselves.”