Vermont withdraws action against Coinbase, awaits SEC’s regulatory clarity

Vermont has officially withdrawn its legal action against Coinbase, which accused the crypto exchange of offering unregistered securities through its staking program.

In a court filing on March 13, Vermont’s Department of Financial Regulation stated that the decision aligns with a similar move by the US Securities and Exchange Commission (SEC).

The regulator acknowledged that the SEC’s new crypto task force will play a key role in shaping future policies for digital assets. As a result, Vermont has chosen to step back while awaiting more explicit regulatory guidelines.

According to the filing:

“In light of the dismissal of the Federal Action and likelihood of new federal regulatory guidance, the Division believes it would be most efficient and in the best interests of justice to rescind the pending Show Cause Order, without prejudice.”

Vermont was one of ten US states, including Alabama, Illinois, Kentucky, Maryland, and New Jersey, that launched legal action against Coinbase in 2023. At the time, the states argued that the exchange’s staking services met the legal definition of securities under their respective laws.

Coinbase’s reaction

Coinbase’s Chief Legal Officer, Paul Grewal, welcomed the development, emphasizing that it reinforces the company’s long-held position that staking does not constitute a security.

Over the years, Coinbase has consistently rejected claims that its staking services fall under securities laws. The company argues that staking is essential for blockchain security and does not meet the legal criteria outlined in the US Securities Act or the Howey Test.

The exchange further stressed that staking is fundamental to the functionality of many blockchain networks, offering security, decentralization, and environmental benefits.

Considering this, he commended Vermont for recognizing the importance of regulatory clarity for digital asset holders.

Grewal stated:

“Our work isn’t over. Congress must seize the bipartisan momentum we’re seeing across the House and Senate to pass comprehensive legislation that takes into account the novel features of digital assets, such as staking.”

Grewal also urged other states with pending cases against Coinbase to follow Vermont’s lead and drop their lawsuits.

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