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US state Vermont has dropped its “show cause order” against crypto exchange Coinbase for allegedly offering unregistered securities to users through a staking service.
Vermont’s Department of Financial Regulation said in a March 13 order that in light of the US Securities and Exchange Commission tossing out its case on Feb. 28, it would follow suit and rescind its action against Coinbase without prejudice.
“The SEC has announced the formation of a new task force to, among other things, provide guidance for the promulgation of rules regarding the regulation of cryptocurrency products and services,” the department said.
Vermont’s financial regulator has decided to drop its legal action against Coinbase. Source: Vermont’s Department of Financial Regulation
“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.”
On the same day the SEC filed its lawsuit in June 2023, the US states of Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin said they were launching legal proceedings against Coinbase.
The show cause order asserted that Coinbase was violating securities laws by offering staking to its users without a license and demanded the exchange provide a reason why the courts shouldn’t hit them with an order directing them to halt the service.
Now that Vermont has opted out, Coinbase chief legal officer Paul Grewal said in a March 13 statement to X that the other states with staking actions should take a “page from Vermont’s playbook.”
“As we have always said: staking services are not securities. We applaud Vermont for embracing progress and providing clarity for its citizens who own digital assets,” he said.
“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,” he added.
Related: YouTuber says SEC will recommend dropping lawsuit over 2018 token ICO
A growing number of firms facing legal action from the SEC have had their cases dismissed in the wake of former SEC Chair Gary Gensler, who took a hardline stance toward crypto, resigning on Jan. 20.
Crypto trading firm Cumberland DRW was among the latest to have its case dropped on March 4, while the regulator is reportedly wrapping up its enforcement action against Ripple Labs after more than four years.
Grewal has also launched a request under the Freedom of Information Act to find out how many enforcement actions were brought against crypto firms under Gensler’s tenure between April 17, 2021, and Jan. 20, 2025, and the cost to the taxpayer.
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