Alabama drops case against Coinbase as crypto policy discussions evolve

Coinbase chief legal officer Paul Grewal also renewed calls for congressional action to establish a unified legal framework for crypto staking.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

The Alabama Securities Commission has officially withdrawn its legal action against Coinbase over the exchange’s staking program, reducing the number of active state-level lawsuits from 10 to five. 

According to the April 23 consent order signed by Commission Director Amanda L. Senn, the agency partially withdrew its enforcement effort to allow time for evolving policy discussions. 

Procedural pause

The order cited the US Securities and Exchange Commission’s (SEC) announcement of a new crypto-focused task force and expectations for guidance on regulatory frameworks, including those governing staking services.

The Commission emphasized that its withdrawal did not reflect a change in its legal position or broader regulatory posture. 

Instead, the decision was framed as a procedural pause, allowing room for emerging federal standards to take shape. Coinbase consented to the order, with both sides agreeing to bear their own legal costs.

Coinbase chief legal officer Paul Grewal responded to Alabama’s reversal with a post on X, noting that the company now faces active lawsuits from only five states. 

Grewal urged the remaining jurisdictions to reconsider their actions and referenced sections of the Alabama order that pointed to the potential inefficiency of continuing piecemeal enforcement in light of shifting federal priorities. He also renewed calls for congressional action to establish a unified legal framework for crypto staking.

With enforcement actions still active in California, Maryland, New Jersey, South Carolina, and Wisconsin, Coinbase remains exposed to state-level legal risks. However, if federal policy advances in the coming months, the rollback in Alabama could serve as a reference point for additional settlements or withdrawals.

State-level enforcement

The original enforcement action stemmed from a coordinated initiative launched on June 6, 2023, when Alabama joined nine other states in filing complaints against Coinbase. 

State regulators argued that Coinbase’s model met the legal criteria for an investment contract, requiring registration or exemption under local securities laws. Some states also issued cease-and-desist orders or barred the firm from continuing staking operations pending compliance.

The suits followed a multistate investigation supported by the SEC.

Staking services, which involve locking up tokens to support blockchain operations in exchange for rewards, were at the center of the legal dispute.

The Alabama Commission’s decision to rescind its case comes two months after a federal court approved a joint motion from the SEC and Coinbase to dismiss a parallel case with prejudice on Feb. 28. 

That federal action, filed in the US District Court for the Southern District of New York, alleged similar violations related to unregistered securities sales through the staking program.

Mentioned in this article