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Coinbase has escalated its dispute with California’s financial regulator into a public pressure campaign, urging state residents to challenge a 2023 ban on staking rewards that the exchange says has cost Californians over $100 million in lost earnings.
The campaign marks a strategic shift from legal compliance to political advocacy, as the company pushes the Department of Financial Protection and Innovation to reverse an enforcement order that classified Coinbase’s retail staking program as an unregistered securities offering.
At stake is whether California—the nation’s largest economy and a regulatory bellwether—will maintain its outlier status as the only major U.S. state to prohibit staking rewards.
The dispute began in June 2023, when the DFPI issued a desist-and-refrain order against Coinbase’s staking rewards program, alleging it violated California securities law. The regulator argued that Coinbase’s model — pooling customer assets and distributing rewards — constituted an unregistered securities offering under state law.
Coinbase rejected that characterization and suspended retail staking services for California users while continuing to offer them in most other U.S. states. According to the company, the order created an uneven regulatory landscape that punished consumers rather than protecting them.
“Staking is not a security,” Coinbase said in a public policy statement responding to the action, arguing that customers retain ownership of their assets and face no investment contract as defined under securities law — Coinbase, Public Policy Team.
The decision effectively cut millions of Californians off from earning yield on proof-of-stake networks such as Ethereum. Coinbase has repeatedly emphasized that no customer funds were lost through its staking services prior to the ban.
As the restriction dragged on, Coinbase shifted from legal compliance to public advocacy — a move that marked the visible expansion of the Coinbase Crypto Campaign. The company launched outreach efforts urging Californians to engage the regulator and question why the state remains an outlier.
Coinbase estimates that residents have missed out on more than $100 million in staking rewards since the order took effect. The company frames those losses as consumer harm rather than investor protection.
“California consumers are being unfairly denied access to a basic blockchain function that is available to users in nearly every other state,” the company said in advocacy materials directed at state officials — Coinbase, Policy Advocacy Statement.
The DFPI has defended its actions as necessary to enforce state law, maintaining that staking products must meet securities registration standards when offered to retail users. In its original enforcement announcement, the regulator said the action was intended to protect consumers from products that had not been properly vetted.
The California dispute has since become part of a larger national strategy. Coinbase executives argue that inconsistent state-by-state enforcement threatens to fracture the U.S. crypto market, pushing innovation offshore and leaving consumers subject to regulatory uncertainty.
As part of the Coinbase Crypto Campaign, the company has urged federal authorities to step in and provide clearer rules that could preempt state-level crackdowns. Coinbase has also increased its engagement with lawmakers, submitting formal comments on state rulemakings and lobbying for legislation that explicitly defines staking outside traditional securities frameworks.
“This patchwork approach is unsustainable,” Coinbase said in a submission to regulators, warning that differing interpretations across states undermine both compliance efforts and consumer confidence — Coinbase, Regulatory Comment Letter.
The California standoff mirrors Coinbase’s broader legal conflicts with U.S. regulators, including its high-profile dispute with the Securities and Exchange Commission over whether crypto staking and other services fall under federal securities laws.
While the immediate impact is confined to California, the implications extend far beyond the state. California is the largest U.S. economy and a bellwether for financial regulation. A sustained staking ban there could encourage other states to pursue similar enforcement actions.
For Coinbase, the campaign is about setting precedent. Allowing California’s order to stand without challenge risks normalizing state-level bans on core crypto services. For regulators, the case tests how far existing securities laws can stretch to cover emerging blockchain activity.
The DFPI has not indicated it plans to reverse its position, and Coinbase continues to operate without retail staking in the state. But the company shows no sign of backing down. By turning a regulatory dispute into a public campaign, Coinbase has signaled that future crypto regulation battles will be fought not only in courtrooms, but also in the court of public opinion.
As lawmakers continue to debate comprehensive crypto legislation in Washington, the Coinbase Crypto Campaign against California’s regulator underscores a central tension in U.S. crypto policy: who sets the rules when technology moves faster than the law.
