US-based cryptocurrency exchange Coinbase has announced that it will temporarily block customers in four states from investing additional assets as local regulators take legal action.
In a July 14 blog post, Coinbase stated that users in California, New Jersey, South Carolina, and Wisconsin would be banned from using certain staking services until further notice. After the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the crypto exchange for offering unregistered securities in June, regulators in 10 U.S. states launched their own court cases, resulting in the suspension of certain services.
“We strongly disagree with any claim that our staking services are securities,” Coinbase said. “But we will fully comply with interim government orders if necessary, even if that happens before we’ve had a chance to defend ourselves.”
According to Coinbase, only actions by regulators in California, New Jersey, South Carolina and Wisconsin require a pause in staking additional assets. Users located in Alabama, Illinois, Kentucky, Maryland, Vermont, and Washington are “eligible to stake cryptocurrencies as before.”
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The announcement came following the first preliminary hearing in the SEC’s case against Coinbase. The commission filed the lawsuit on June 6, alleging that the crypto exchange had operated as an unregistered security broker since 2019. Coinbase has largely denied all allegations.
State and federal regulators have taken action against other crypto firms for staking, claiming that the services violated securities laws. In February, Kraken settled a $30 million settlement with the SEC, requiring it to stop offering any staking service or program to US customers.
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