Coinbase Faces Regulatory Pressure in California Amid 'War on Staking' Dispute

Coinbase is pushing back against growing regulatory pressure from multiple U.S. states, including California, over its cryptocurrency staking services. In a blog post published in May 2025, the San Francisco-based exchange said regulators in California, New Jersey, South Carolina, and Wisconsin have taken steps that effectively block residents from participating in staking programs, effectively denying crypto users roughly $90 million in potential rewards.

The company explained that staking rewards in these states have been significantly limited or cut off entirely due to state-level enforcement actions and legal challenges. While Coinbase continues to offer staking services elsewhere, the blocked access in key markets has reignited concerns about inconsistent regulation across the country.

This comes at a time when interest in crypto investment strategies, including staking and early-stage projects, continues to grow. Many investors looking for exposure to digital assets now explore options well before tokens reach major exchanges, looking for top crypto presales, or seeking yield through DeFi protocols. For these users, staking is often seen as a way to put passive assets to work while supporting blockchain networks.

The U.S. crypto sector is also grappling with broader legal uncertainty, especially around services that generate yield for retail investors. In particular, state regulators argue that staking services, where users delegate their assets to platforms like Coinbase in exchange for a share of rewards, may fall under securities laws. The friction highlights ongoing disagreements about what constitutes an investment contract in a decentralized environment.

Coinbase has maintained that its staking service is not an investment product. Instead, it argues that staking is a fundamental blockchain function, more like contributing to the maintenance of a network than buying a financial asset. The company acts as a middleman, handling the technical complexities for users, which it claims is a necessary feature to promote accessibility.

In California, the state’s Department of Financial Protection and Innovation (DFPI) filed an enforcement action in late 2023, asserting that Coinbase’s staking program violated state securities laws. The DFPI said that by pooling customer assets and marketing expected returns, Coinbase created a setup that should have been registered as a securities offering. The agency’s move followed similar actions in other states, each citing the need to protect consumers from what they view as investment products without adequate oversight.

These enforcement efforts have taken place alongside multiple lawsuits, adding pressure to the company’s legal and compliance teams. In February 2025, a group of investors filed a class-action lawsuit in California, accusing the company of facilitating the trading of unregistered securities by listing certain tokens.

Coinbase’s dispute with regulators touches on broader issues in the U.S. crypto economy, such as the need for clear rules, the limits of state-level oversight, and the challenge of applying old laws to new technologies. The company has publicly called for new federal legislation that distinguishes between centralized investment schemes and decentralized infrastructure support. Without these reforms, it argues, enforcement actions will continue to punish everyday users while failing to curb actual bad actors in the industry.

Amid these mounting challenges, Coinbase insists that it will continue to defend its services and user base through the courts and public channels. The company has framed the current regulatory pressure as part of a broader "war on staking", a term used in its May blog post, and claims that the outcome of this fight will influence whether the U.S. remains a viable hub for digital asset innovation.

Staking is a process where users lock up their crypto tokens to help validate blockchain networks like Ethereum, earning rewards in return. Coinbase offers staking as a service, pooling user assets and managing the technical process on their behalf, while taking a small fee. The company claims that no user has ever lost money through their staking services.