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America's largest crypto exchange Coinbase today said in a statement that it stands by staking and that it will fight the service in court—but would stop staking for new customers in California, New Jersey, South Carolina, and Wisconsin.
In a Friday statement, the San Francisco-based digital asset company that "Americans in every state deserve access to the same technology and economic opportunities as people everywhere," and therefore it would push back against certain states requiring a staking ban.
But for now, customers in the four states will be unable to stake additional assets through Coinbase while these actions are pending.
"Due to the actions taken by state regulators in California, New Jersey, South Carolina, and Wisconsin, customers in those states will be unable to stake additional assets through Coinbase while these actions are pending," the company said, adding that customers' crypto that was staked before these orders were issued remains unaffected.
The news comes after U.S. Securities and Exchange Commission last month sued Coinbase for allegedly failing to register as an exchange, clearing house, and broker despite providing investors these services.
Wall Street's biggest regulator also alleged that Coinbase offered and sold unregistered securities via its staking service.
Shortly afterwards, a multi-state task force that includes California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, Wisconsin along with Alabama filed charges against the company for violating securities laws.
Staking is the process of "locking-up" cryptocurrency to keep a blockchain’s network running. Those who hold proof-of-stake assets—such as Ethereum (ETH), the second largest cryptocurrency by market capitalization—pledge it to the network by sending it to a specific blockchain address and can receive rewards for doing so.
But it’s a controversial issue: The SEC in February hit American crypto exchange Kraken with a $30 million fine for allegedly failing to register the offer and sale of its crypto asset staking-as-a-service program.
Editor's Note: This post was corrected reflect that 10 states are alleging Coinbase has violated securities laws.