Alabama drops enforcement action against Coinbase

Alabama has dropped its enforcement action against Coinbase, marking a significant shift in the ongoing legal battles over crypto staking programs in the U.S. 

The announcement was made by Coinbase’s Chief Legal Officer, Paul Grewal, signaling that only five states now continue to pursue staking-related cases against the exchange.

The Alabama Securities Commission had previously accused Coinbase of offering unregistered securities through its staking rewards program. The program allows users to lock up their crypto to help validate blockchain transactions in exchange for rewards, while Coinbase earns a commission. 

State regulators argued this model constituted an investment contract that should be registered under securities laws.

Alabama was one of ten states, including California, Illinois, Maryland, and Washington, that filed coordinated actions in June 2023. These actions followed a multistate investigation supported by the U.S. Securities and Exchange Commission. 

Time to ‘follow suit’

The suits led to cease-and-desist orders, potential financial penalties, and in some cases, bans on Coinbase offering staking services within state borders.

Grewal noted that four of the remaining five states have banned Coinbase staking entirely, limiting user access and, in his view, misallocating taxpayer resources.

 “It’s time for these outliers to follow suit,” he said, calling for congressional action to establish a clear regulatory framework for digital assets.

The rollback of Alabama’s case is a win for Coinbase, which has consistently maintained that its staking program complies with existing laws.

It also highlights growing calls for federal clarity as state-level actions continue to diverge, creating legal uncertainty for crypto firms operating nationwide.