A task force of 10 U.S. state regulators are coming after crypto exchange Coinbase (COIN), alleging it violated state securities laws by offering its staking program to residents.
Coinbase has 28 days to explain to the Alabama Securities Commission (ASC) how it is not violating state securities laws with its staking program, the regulator said on Tuesday. The California Department of Financial Protection and Innovation (DFPI) has meanwhile filed for an order for Coinbase to "desist and refrain from the further offer and sale of securities in California," while Maryland ordered Coinbase to cease and desist the offering.
The DFPI said it "has issued no permit or other form of qualification authorizing Coinbase to offer or sell securities, including the Coinbase Staking Offerings, in California. Nor are the offers and sales of these securities excepted, exempt, or otherwise not subject to qualification."
The action comes after Coinbase was sued by the U.S. Securities and Exchange Commission earlier on Tuesday for the alleged sale of unregistered securities, a day after the regulator took similar action against Binance, the world's largest crypto exchange by market cap.
In addition to Alabama and California, the task force of states moving against the crypto company includes Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin.
The ASC's "show cause" order alleges Coinbase and its parent corporation Coinbase Global broke the law by offering the staking rewards program "Earn" to state residents, and the regulator wants the entities to show "why they should not be directed to cease and desist from selling unregistered securities in Alabama."
The ASC action doesn't forbid Coinbase from offering staking as a service as long as it complies with the law, but the order itself was the result of a task force of 10 state securities regulators in the U.S., namely Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin.
“The ASC is committed to protecting Alabama consumers and investors, including those who choose to invest in the decentralized finance space. This action is another step toward ensuring that investors in crypto asset products are offered the same protections under our laws and are fully aware of the risks involved in these investments,” said ASC Director Amanda Senn in a press statement.
Maryland's order gives Coinbase 15 days to respond to the Securities Commissioner.
The ASC issued a similar order to now-bankrupt crypto lender Celsius back in 2021, also suspected of violating state securities laws with its "Earn Rewards" program.
UPDATE (June 6, 16:38 UTC): Updates headline and body to reflect California DFPI action.
UPDATE (June 6, 18:30 UTC): Adds Maryland action.
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