US-based cryptocurrency exchange Coinbase has temporarily paused its staking services in four states in response to legal proceedings from the Securities and Exchange Commission (SEC).
in a blog post On July 14, Coinbase announced that it would temporarily suspend its retail staking service in California, New Jersey, South Carolina, and Wisconsin.
This decision comes in response to the filing of a request by the US Securities and Exchange Commission (SEC). lawsuit against the cryptocurrency exchange in June for offering unregistered securities.
In addition to the SEC lawsuit, regulators in 10 US states launched legal proceedings and suspended certain services.
“We strongly disagree with any accusation that our staking services are securities,” Coinbase wrote. “But we will fully comply with preliminary state orders when necessary, even if that happens before we have had a chance to defend ourselves.”
However, it is essential to note that only regulatory actions in CaliforniaNew Jersey, South Carolina, and Wisconsin require a pause on additional asset participation.
These states have requested changes to staking services while legal proceedings related to those services are ongoing.
Cryptocurrencies that were wagered prior to the issuance of these orders will not be affected by the temporary suspension.
Users based in Alabama, Illinois, Kentucky, Maryland, Vermont, and Washington will continue to be eligible to stake their cryptocurrencies as before the regulatory action was taken.
Hearing between Coinbase and the SEC sheds light on the tone of the litigation and the impact on the industry
A pre-motion hearing between the US SEC and Coinbase, initially scheduled for August but held on July 13, offered insight into the tone of the litigation and the potential impact on the broader crypto industry.
During the hearing, which lasted more than two hours, Judge Katherine Polka Faila of the US District Court for the Southern District of New York posed questions to the SEC and Coinbase on various topics.
These included the definition of stake, Coinbase’s initial public offering (IPO) filings, and the application of the main issues doctrine.
In addition, Coinbase’s lawyers introduced the lead questions doctrine, which was recently invoked by the US Supreme Court to invalidate President Biden’s proposal for student loan forgiveness, as part of their defense against the lawsuit by Coinbase. SEQ.
The hearing was also briefly recessed to allow both sides to consider a federal judge’s ruling on the SEC’s separate lawsuit against Ripple.
This case is being closely watched not only because it involves the world’s largest economy securities regulator and a well-established crypto company, but also because it could set precedents in securities law, market structure, and the regulatory powers of the sec.
The conference focused mainly on procedural and administrative issues.
Coinbase sought early dismissal of the SEC’s complaint arguing that the tokens in question do not meet the criteria for securities under the Howey test.
In response, the SEC accused Coinbase of ignoring longstanding legal principles and attempting to redefine the definition of an investment contract.
