The state of Vermont has decided to withdraw its “show cause order” against the cryptocurrency exchange Coinbase, which was accused of providing unregistered securities to users via a staking service.
According to a statement from Vermont’s Department of Financial Regulation on March 13, following the dismissal of the case by the US Securities and Exchange Commission on February 28, it would likewise rescind its action against Coinbase without any prejudicial implications.
The department noted, “The SEC has announced the establishment of a new task force aimed at offering guidance on the formulation of rules concerning the regulation of cryptocurrency products and services.”
The financial regulator in Vermont has chosen to abandon its legal pursuit of Coinbase.
“Considering the dismissal of the federal case and the expectation of new federal regulatory guidance, the Division believes it would be most effective and in the interest of justice to withdraw the outstanding Show Cause Order without prejudice.”
On the same day that the SEC filed its lawsuit in June 2023, several states including Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin commenced legal actions against Coinbase.
The show cause order had claimed that Coinbase was in violation of securities laws by providing staking services to its users without a necessary license and sought an explanation of why the courts should not issue an order to cease the service.
With Vermont’s withdrawal, Coinbase’s chief legal officer, Paul Grewal, remarked in a statement on March 13 that other states facing staking-related actions should consider following Vermont’s example.
Paul Grewal expressed gratitude for Vermont’s decision.
“As we have consistently maintained: staking services are not securities. We commend Vermont for embracing progress and offering clarity to its residents who possess digital assets,” he stated.
“Our efforts are not yet finished. Congress must capitalize on the bipartisan momentum observed in both the House and Senate to enact comprehensive legislation that recognizes the unique aspects of digital assets, such as staking,” he added.
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A rising number of firms that have faced legal action from the SEC have had their cases dismissed following the resignation of former SEC Chair Gary Gensler, who was known for his stringent approach towards crypto, on January 20.
Recently, the cryptocurrency trading firm Cumberland DRW also had its case dismissed on March 4, while it has been reported that the regulator is concluding its enforcement case against Ripple Labs after a span of over four years.
Grewal has filed a request under the Freedom of Information Act to determine how many enforcement actions were initiated against cryptocurrency companies during Gensler’s tenure from April 17, 2021, to January 20, 2025, as well as the associated costs to taxpayers.
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