Coinbase claims $90 million in staking rewards lost from state-level bans

Publicly listed exchange Coinbase has called for an end to all lawsuits against staking in the US. In a recent article, the firm’s Vice President of Legal, Paul VanGrack, called on the states with pending lawsuits against Coinbase’s staking program to drop them.

The Securities and Exchange Commission, along with ten other states, had sued the exchange over its staking program in June 2023, describing it as unregistered securities. Although Coinbase contested the legal action at the time, some of the states issued cease and desist orders, forcing Coinbase to end the program in their states.

As the US regulatory policy towards the crypto industry has shifted, the SEC has dismissed its lawsuit with prejudice. Five other states, including Illinois, South Carolina, Alabama, Vermont, and Kentucky, also dropped their own lawsuits.

However, five other states, including California, Maryland, Wisconsin, New Jersey, and Washington, still have pending litigation. Coinbase believes they should also withdraw their cases.

VanGrack said:

“It’s time for these states to catch up with the SEC—and nearly every other state—and drop their unfounded cases.”

According to Coinbase, it knew from the outset that the lawsuit was wrong and has fought to defend itself while educating policymakers. The exchange believes that the SEC and other states have dismissed their own lawsuits as a result of its efforts.

However, it described the remaining lawsuits as generating regulatory uncertainty at a time when the US is making moves to establish a framework for crypto. Thus, a  Coinbase executive argued that the decision of some states to hold out and not drop their lawsuits has become indefensible, and the exchange will continue its fight against the lawsuits.

Over $90 million in staking rewards have been lost due to the staking ban

Meanwhile, VanGrack focused on the states that still have pending cease and desist orders against Coinbase’s staking, noting that they are only harming consumers. Four states, California, Maryland, Wisconsin, and New Jersey, currently have that.

He wrote:

“All but one (Washington) are enforcing cease-and-desist orders that have already cost residents tens of millions of dollars in missed staking rewards, while limiting consumer choice and increasing regulatory uncertainty.”

The executive noted that a strict order such as this is usually used only for emergency cases, such as Ponzi schemes, and not for normal products, such as Coinbase staking. He further highlighted what makes Coinbase a top staking service provider, including its safety and compliance records.

Interestingly, the exchange said that the war on staking is costing US residents. VanGrack claimed that an estimated $90 million in staking rewards have been lost by residents in the four states due to the ban, and it will continue to increase if the states do not drop their cases.

He added that the ban also singles out Coinbase among all staking service providers, which means that the state is picking winners and losers. This move could force consumers to use staking platforms with less regulatory oversight and put them at higher risk, he argued.

Coinbase pressures regulators to become pro-crypto

Meanwhile, the Coinbase article is just one of the many advocacy efforts that the exchange has made over the past few months. The exchange has grown bolder and stronger in its push for regulatory clarity since President Trump was elected.

It is currently involved in a lawsuit against the Federal Deposit Insurance Corporation (FDIC) over the impact of its crypto debanking efforts, and recently wrote to the Office of Government Ethics (OGE) to allow SEC users to hold and use crypto, so they can better understand what they are regulating.

The exchange is also reportedly launching a campaign against the four states that have banned staking, with plans to emphasize the losses due to the ban and lawsuits.

Coinbase’s pro-crypto advocacy is unsurprising, given that it is one of the biggest beneficiaries of regulatory clarity. Although its COIN stock is down 15.57% this year, the firm continues to see increased adoption as the crypto market grows stronger.

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