Coinbase CLO Slams States for Flouting Staking Law in CLARITY Act—Crypto Clarity at Risk

Coinbase's Chief Legal Officer isn't holding back—states are dropping the ball on staking regulation, and the CLARITY Act is caught in the crossfire.

Here's the breakdown:

The Backbone of Crypto Staking Under Fire

While DeFi evangelists preach decentralization, regulators keep playing whack-a-mole with rulebooks. The CLARITY Act was supposed to fix that—except some states apparently missed the memo.

Legal Limbo for Yield-Seekers

Staking rewards aren't going anywhere, but neither is the regulatory gray zone. Coinbase's CLO argues this isn't just bureaucratic laziness—it's actively stifling innovation (and, let's be real, Wall Street's FOMO is showing).

One thing's clear: until lawmakers get their act together, crypto's wild west era isn't over—it's just wearing a suit.

TLDR

• Coinbase CLO Paul Grewal criticized state agencies for not following the CLARITY Act on crypto staking regulations.
• The CLARITY Act confirms that staking-as-a-service is not a security under federal law.
• Five states including California and New Jersey continue enforcement actions against Coinbase despite the new law.
• Coinbase CLO pointed out that lawmakers from those states supported the CLARITY Act in Congress.
• Coinbase is calling for a unified federal approach to replace inconsistent state-level crypto enforcement.

State-level resistance to new crypto laws escalated this week as Coinbase CLO Paul Grewal challenged enforcement inconsistencies. Although Congress passed the CLARITY Act affirming that staking-as-a-service is not a security, several states remain noncompliant. This regulatory divide has reignited industry concerns over fragmented legal interpretations and enforcement practices.

Coinbase CLO Criticizes States Ignoring Federal Law

Coinbase CLO raised concerns about state agencies continuing to target crypto staking activities despite new federal legislation. He pointed out that the CLARITY Act clearly defines staking-as-a-service as a non-security and orders rulemaking. However, five states including California, New Jersey, Washington, Maryland, and Wisconsin, are still pursuing cases.

I'm not going to lie–it's been a day. But even as we celebrate GENIUS, before I crash I gotta call out one critical provision of CLARITY Act that hasn’t received the attention it is due: staking-as-a-service is confirmed as a non-security and rulemaking is ordered. 1/3 pic.twitter.com/FEx65WEe0A

— paulgrewal.eth (@iampaulgrewal) July 19, 2025

These enforcement actions directly contradict the legal clarity provided by the CLARITY Act and raise questions about regulatory alignment. Coinbase CLO noted that 32 Democratic lawmakers from these states supported the legislation in the House. Nevertheless, state regulators have yet to adjust their enforcement strategies accordingly.

This mismatch between federal law and state-level enforcement presents major compliance challenges for crypto companies. Coinbase CLO emphasized that a unified framework is necessary for lawful operations across jurisdictions. He called for consistent application of the law to eliminate conflicting interpretations that disrupt the industry.

GENIUS Act Applauded, but CLARITY Act Faces Resistance

The passage of the GENIUS Act and the CLARITY Act marks a milestone in U.S. crypto regulation efforts. While the GENIUS Act passed with strong bipartisan support, implementation of the CLARITY Act remains stalled at the state level. Coinbase CLO highlighted this discrepancy in a recent statement posted on X.

Despite the federal mandate, states continue to classify staking-as-a-service as a potential securities violation. This stance undermines the intended regulatory certainty provided by Congress. Coinbase CLO argued that failure to honor federal law hampers both innovation and investor confidence.

The GENIUS Act outlines broader support for blockchain innovation and digital asset use, reinforcing the need for clear rules. Yet without state cooperation on the CLARITY Act, crypto firms remain exposed to legal risk. Coinbase CLO reiterated the need for federal alignment to prevent further fragmentation of oversight.

Coinbase Expands Lobbying as It Presses for Federal Uniformity

Coinbase CLO stated that inconsistent enforcement harms the U.S. position as a global leader in digital finance. To address this, Coinbase recently expanded its lobbying efforts with new strategic hires, including former political advisers. The company aims to increase engagement with Democratic lawmakers.

Coinbase CLO believes the Senate must now act quickly to finalize bipartisan crypto legislation. He maintains that rulemaking will provide a transparent path forward for staking and other decentralized services. Meanwhile, regulatory uncertainty persists as state agencies delay compliance with federal guidance.