On July 14, Coinbase, the popular US-based cryptocurrency exchange, announced its temporary decision to halt staking services in four US states. This surprising move follows a lawsuit filed by the US Securities and Exchange Commission (SEC), accusing Coinbase of selling unregistered securities. The states demanding this interruption include California, New Jersey, South Carolina, and Wisconsin. Simultaneously, regulatory entities in ten states have put specific services on hold after initiating legal proceedings.
Coinbase protests the allegations that its staking services, which enable crypto owners to participate in network activities for potential rewards, are securities. However, they emphasised their commitment to comply with preliminary state orders. Such compliance is necessary, even if it anticipates the company’s chance to rebut these charges.
The suspension only influences ongoing stakes in the highlighted regions. Therefore, it’s crucial to mention that any cryptocurrencies staked before these orders will remain untouched. Furthermore, users residing in Alabama, Illinois, Kentucky, Maryland, Vermont, and Washington, have the green light to continue staking their cryptocurrencies as previously.
Beyond the regulatory actions, a pre-motion hearing involving the SEC and Coinbase provided valuable insights into the lawsuit’s tone and its possible effects on the larger-scale crypto industry. Judge Katherine Polka Faila, presiding over the US District Court for the Southern District of New York, headed the over two-hour-long hearing.
Among the key topics discussed, the definition of staking, Coinbase’s IPO filings, and the application of the Major Questions Doctrine – recently used by the U.S. Supreme Court to dismiss President Biden’s student loan forgiveness proposal – were central. Interestingly, during the hearing, both parties took a brief recess to evaluate a federal judge’s ruling over the SEC’s separate lawsuit against Ripple.
This case is under close scrutiny due to its implications on securities law and regulatory powers of the SEC, both of which could have a significant influence on the thriving crypto industry and its structure.
The punchline of the hearing reveals a clash of perspectives: with Coinbase advocating for an early dismissal based on the argument that the tokens under consideration do not satisfy the Howey test for securities, facing an SEC counterclaim accusing Coinbase of disregarding long-established legal protocols and redefining the concept of an investment contract. A classic case of the old guard vs the avant-garde, one might say.
Source: Cryptonews
