Coinbase, the American cryptocurrency exchange, has decided to temporarily halt its staking services in four states following legal action initiated by the Securities and Exchange Commission (SEC).
In an official blog post on July 14, Coinbase disclosed its decision to suspend the retail staking service in California, New Jersey, South Carolina, and Wisconsin.
This move was prompted by the SEC’s lawsuit against the crypto exchange, filed in June, alleging the offering of unregistered securities.
Furthermore, regulatory authorities in ten other US states have also taken legal action, leading to the suspension of certain services.
“We vehemently refute any allegations claiming our staking services should be classified as securities,” Coinbase stated. “Nevertheless, we will fully adhere to the preliminary state orders in those specific regions where it is mandated, even if this means we cannot present our defense immediately.”
It is important to emphasize that only the regulatory actions in California, New Jersey, South Carolina, and Wisconsin have necessitated the temporary pause on staking additional assets. These states have requested modifications to the staking services while the legal proceedings concerning these services remain ongoing.
Notably, cryptocurrencies that were already staked before the issuance of these orders will remain unaffected by the temporary suspension.
For users located in Alabama, Illinois, Kentucky, Maryland, Vermont, and Washington, they will retain their eligibility to stake their cryptocurrencies as they did before any regulatory actions were taken.
Insights from Coinbase vs. SEC Hearing: Litigation Tone and Industry Impact Revealed
Insights from Pre-Motion Hearing: Coinbase vs. SEC Offers Glimpse into Litigation Tone and Crypto Industry Impact
The scheduled pre-motion hearing between the US SEC and Coinbase, originally planned for August but held on July 13, provided valuable insights into the ongoing litigation’s tone and potential ramifications for the broader cryptocurrency industry.
Judge Katherine Polka Faila, presiding over the US District Court for the Southern District of New York, engaged both the SEC and Coinbase in a comprehensive discussion, delving into various topics. These included the definition of staking, Coinbase’s initial public offering (IPO) filings, and the application of the major questions doctrine.
Coinbase lawyers invoked the major questions doctrine, recently used by the US Supreme Court to invalidate President Biden’s student loan forgiveness proposal, as part of their defense against the SEC’s complaint.
During the hearing, a brief recess was taken to allow both parties to consider a federal judge’s ruling on the SEC’s separate lawsuit against Ripple.
This high-profile case draws significant attention due to its involvement of the securities regulator of the world’s largest economy and an established cryptocurrency company. Moreover, its outcome could establish critical precedents in securities law, market structure, and the regulatory powers of the SEC.
The focus of the conference primarily centered around procedural and administrative matters. Coinbase aimed for the early dismissal of the SEC’s complaint, arguing that the tokens in question did not meet the criteria for securities under the Howey test.
In response, the SEC accused Coinbase of neglecting long-standing legal principles and attempting to redefine the definition of an investment contract.