Coinbase said retail clients in four states will no longer to be able to add new assets to its staking product while numerous legal proceedings carry on.
Ten states — including Alabama, California, and New Jersey — filed actions against the exchange to halt its staking program within their jurisdictions on the heels of the Securities and Exchange Commission's lawsuit against the firm in June.
The SEC and several states argue that the product constitutes a unregistered security offering. Coinbase claims staking is not a security, maintaining that it is a "core part of ensuring the cryptoeconomy functions for hundreds of millions of users around the globe."
The firm has been engaged with policymakers across several states to keep its staking program intact for all users, but California, New Jersey, South Carolina, and Wisconsin will require the firm to stop processing additional staking assets for customers.
"Customers' crypto that was staked before these orders were issued remains unaffected," the company said in the Friday blog post. "Impacted customers have received an email with more information specific to their state, and all customers can visit our Help Center to learn more about these actions and the changes we will be implementing in the coming weeks in these four states."
Coinbase staking services will operate normally in other states
Coinbase's staking services will operate normally in the other states in which there are ongoing proceedings.
"Staking is not some exotic or complex financial product," the company said.
"In fact, it is not a financial product at all," it continued. "Whether a user stakes on their own or through a service like ours, they remain the owner of their crypto at all times. Unlike lending, for example, there is no risk that a borrower will fail to repay, because the underlying crypto remains in custody from start to finish."
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