The Alabama Securities Commission has withdrawn its legal action against Coinbase over the exchange’s staking program. This decision reduces the number of active state-level lawsuits against Coinbase from 10 to five. The Commission’s Director, Amanda L. Senn, signed the consent order on April 23, partially withdrawing enforcement efforts to allow room for evolving policy discussions regarding regulatory frameworks, including those governing staking services.
The decision to withdraw the legal action against Coinbase was framed as a procedural pause in light of the US Securities and Exchange Commission’s announcement of a new crypto-focused task force and expectations for guidance on regulatory standards. The Commission clarified that this withdrawal does not reflect a change in their legal position or broader regulatory posture. Coinbase has consented to the order, and both parties have agreed to cover their own legal costs.
Coinbase’s chief legal officer, Paul Grewal, responded to Alabama’s withdrawal by expressing the company’s satisfaction of now facing active lawsuits from only five states. Grewal urged the remaining jurisdictions to reconsider their actions and called for congressional action to establish a unified legal framework for crypto staking. With enforcement actions still ongoing in California, Maryland, New Jersey, South Carolina, and Wisconsin, Coinbase remains exposed to state-level legal risks.
The original enforcement action against Coinbase was part of a coordinated initiative launched on June 6, 2023, involving Alabama and nine other states filing complaints against the exchange. State regulators argued that Coinbase’s staking model met the legal criteria for an investment contract, requiring registration or exemption under local securities laws. Some states issued cease-and-desist orders or halted staking operations pending compliance. The suits followed a multistate investigation supported by the SEC, focusing on staking services involving locking up tokens to support blockchain operations in exchange for rewards.
The Alabama Commission’s decision to withdraw the legal action against Coinbase comes two months after a federal court approved a joint motion from the SEC and Coinbase to dismiss a parallel case with prejudice on Feb. 28. This federal action, filed in the US District Court for the Southern District of New York, alleged similar violations related to unregistered securities sales through the staking program. With active enforcement actions still ongoing in five states, Coinbase remains exposed to state-level legal risks but could potentially benefit from a reference point for additional settlements or withdrawals if federal policy advances in the coming months.
In conclusion, the Alabama Securities Commission’s withdrawal of legal action against Coinbase over the exchange’s staking program marks a significant development in the ongoing regulatory challenges faced by the cryptocurrency industry. The decision to pause enforcement efforts in Alabama highlights the importance of evolving federal regulatory standards and the need for a unified legal framework for crypto staking. Coinbase’s response to the withdrawal emphasizes the company’s commitment to regulatory compliance and calls for other states to reconsider their actions in light of shifting priorities at the federal level. While Coinbase still faces legal risks in five states, the rollback in Alabama could potentially pave the way for additional settlements or withdrawals as federal policy developments unfold.
