Coinbase bags legal victory as Alabama drops Staking enforcement case

Coinbase scored a win in the legal battle linked to crypto staking wars as Alabama has officially dropped its enforcement action against the exchange. This leaves only five states still chasing Coinbase over its staking program, which lets users earn rewards for helping validate blockchain transactions.

This comes in the wake of Coinbase’s recent progress in its Freedom of Information Act lawsuit against the US Securities and Exchange Commission (SEC). The exchange bagged internal documents about the Gensler-era investigation of ETH2.0. 

Grewal slams States over Staking lawsuits

Paul Grewal, Chief Legal Officer at Coinbase, in a post announced that they have reached halfway in the legal battle after Alabama backed off. The US State was one of ten states that teamed up in June 2023 to accuse the exchange of offering unregistered securities. It turned out to be a tag-team regulatory ambush with the SEC backing it up.

Grewal mentioned that most of the remaining states have already banned staking outright, and he’s not impressed. He added that five holdouts are still electing to waste taxpayer resources on lawsuits. This move has deprived consumers of the right to earn on their platform of choice.

The case’s dismissal is a big win for Coinbase, which has stood firm with its stance that staking is not securities. However, it also puts more pressure on D.C. to get its act together, and even the regulators are waiting for a federal rulebook that makes sense.

As per the court filings, back in June 2023, Alabama’s Securities Commission dropped a “show cause” order demanding that Coinbase explain why its staking services shouldn’t be shut down as illegal securities. That same day, the SEC filed a federal lawsuit echoing the same claims.

Fast forward to Feb 28, 2025, A federal court dismissed the SEC case with prejudice. It means it can’t come back. The filing highlighted that the SEC has just formed a new task force to figure out what crypto regulation should actually look like. This suggests that regulators are realizing that chasing staking programs with outdated laws is a legal headache. However, it is better to wait for Congress or the SEC to drop real rules.

COIN stock rises 3% amid legal wins

The US’s biggest crypto exchange is taking the heat from the top watchdogs. Coinbase managed to get its hands on some crucial Gensler-linked investigation documents. This includes a May 2022 PDF file titled “Analysis of Ethereum 2.0 under Howey” that was prepared by SEC staff.

Grewal mentioned that there was a February 2023 email titled “RE Is Ethereum a security” and an April 2023 PDF file titled “2 – Ethereum 2.0.” He added that the docs also hold an August 2023 email titled “RE Time for an ETH Discussion” and two February 2024 emails titled “FW Spot ETH – security not security” and “ETH—Security or Not”

Coinbase (COIN) price continues its upward recovery run as legal complications take a back seat here. COIN price surged by almost 3% in Wednesday’s trading session. It remains up by more than 14% over the past week. However, it is still down by 4% in the past month. COIN is trading at an average price of $194.80 at the press time.

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