Ten State AGs Sue Coinbase, Alleging Securities Law Violations

#Alabama, #California, #Illinois, #Kentucky, #Maryland, #NewJersey, #SouthCarolina, #Vermont, #Washington, and #Wisconsin each?filed?enforcement actions against leading cryptocurrency exchange Coinbase and its parent,?alleging?that Coinbase’s staking rewards program constituted unregistered securities sales in violation their states’ securities laws – this followed a Security Exchange Commission / multistate task force investigation.

The actions alleged that Coinbase offered and sold unregistered securities based on its staking rewards program. Under the program, holders of cryptocurrency “stake” deposited digital assets to validate transactions on the blockchain, with Coinbase paying out additional digital assets to depositors who stake their assets and receive a commission from the profits. Neither the Federal Deposit Insurance Corporation (FDIC) nor the Securities Investor Protection Corporation (SIPC) insures the program. As of March 29, approximately 3.5 million staking reward program accounts nationwide existed, valued at approximately $4.8 million.

Each state issued cease-and-desist… some ordered additional financial/nonfinancial penalties, including permanently barring Coinbase from doing business in the state.

Why It Matters

It is significant as they are part of a growing trend of increased, bipartisan regulatory enforcement in the cryptocurrency space at the state and federal levels. As the regulatory framework for cryptocurrencies continues to develop, companies must prioritize compliance to avoid potential legal and reputational risks.

Source- Ten State AGs Sue Coinbase, Alleging Securities Law Violations | Regulatory Oversight

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