Coinbase Fights State Lawsuits—$90M in User Staking Rewards Hang in the Balance

Regulators love playing whack-a-mole with crypto profits—now they’re gunning for staking rewards. Coinbase claims state lawsuits could block access to $90 million earmarked for users, turning DeFi’s ’passive income’ promise into another bureaucratic limbo.

Who needs bear markets when you’ve got legislators freezing funds? The exchange argues these suits create artificial scarcity—ironic, given how regulators pretend to protect investors from it. Meanwhile, users watch their potential gains collect regulatory dust.

Another day, another nine-figure crypto opportunity caught in the crosshairs of ’protection.’ Maybe next they’ll sue gravity for making markets go down.

User impact and lost rewards

Coinbase’s vice president of legal, Paul VanGreck, estimates that California, New Jersey, Maryland, and Wisconsin residents have collectively missed out on over $90 million in staking rewards since June 2023. 

In an April 25, VanGreck noted that the cease-and-desist orders against Coinbase were issued using emergency procedures typically reserved for cases of serious securities fraud, such as Ponzi schemes, which he argues is inappropriate for routine staking activities. 

He said the restrictions affect consumer choice and contribute to regulatory uncertainty in the broader digital asset industry.

VanGreck further emphasized that Coinbase operates under extensive federal and state regulations. The company is registered with FinCEN as a money services business, holds 46 state money-transmission licenses, and is publicly traded in the US, subject to regular financial disclosures. 

Additionally, it maintains a security commitment that includes indemnifying users for losses in the unlikely event of a staking failure caused by Coinbase.

VanGreck argued that the continued litigation by the five states contradicts the broader trend toward regulatory clarity. He referenced ongoing efforts by Congress to establish a comprehensive digital asset framework and noted that regulators, including the SEC, have shown movement toward a more balanced approach. 

VanGreck added that courts are not the appropriate venue to decide on staking policy and that elected officials should be the ones to define the legal status of staking services.

Coinbase has pledged to contest the remaining lawsuits and defend user access to staking services.