Cryptocurrency exchange Coinbase has temporarily halted staking services for customers in 4 U.S. states following legal actions by regulators.
Coinbase said in a blog post that users in California, New Jersey, South Carolina and Wisconsin would be restricted from staking additional assets until further notice.
The Decision and Legal Actions
The move comes after the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase in June alleging the company had been operating as an unregistered securities broker since 2019.
Regulators in 10 states, including the 4 mentioned above, also took legal actions against Coinbase’s staking services.
Though Coinbase “strongly disagrees” that its staking services qualify as securities, it said it remains committed to complying with the state orders while defending itself in court.
The pause in staking additional assets only applies to the 4 states that took legal action. Customers in other states where regulators did not file suit can continue staking as normal for now.
Growing Regulatory Scrutiny
The legal actions against Coinbase reflect the broader scrutiny and complex regulations surrounding the crypto industry.
Regulators argue that many crypto staking services violate securities laws by offering investors yields generated from the validation of blockchain transactions.
However, crypto firms counter that staking simply rewards users for participating in the operation of decentralized networks, not investing in securities.
The SEC sued another crypto exchange, Kraken, in February over its staking services. Kraken settled the case for $30 million but had to stop offering staking programs to U.S. customers.
Impact on Coinbase and Staking Industry
Coinbase’s decision to pause certain staking services suggests the regulatory and legal pressures facing the company.
While Coinbase disputes that its offerings qualify as securities, it has opted to comply with state orders for now as it builds its legal defense.
The outcome of Coinbase’s case could set an important precedent for how crypto staking is regulated in the U.S. and impact the wider staking industry.
For now, Coinbase customers in most states can continue using staking services. But increased regulatory scrutiny may force further changes or limitations over time.
In conclusion, as regulators and crypto firms spar over the legal definition of staking, exchanges like Coinbase are caught in the middle. Coinbase’s pause of staking in 4 states highlights the challenges of operating in this uncertain regulatory landscape.
This article is based on the original news published on Crypto Intelligence.