Vermont Drops Coinbase Case, Citing SEC Guidance

Vermont has decided to drop its legal action against coinbase, following the lead of the US Securities and Exchange Commission (SEC). The state's Department of Financial Regulation announced on March 13 that it would rescind its "show cause order" against the crypto exchange, which had accused Coinbase of offering unregistered securities through its staking service. This decision comes in the wake of the SEC's dismissal of a similar case against Coinbase on February 28. The SEC had announced the formation of a new task force to provide guidance on the regulation of cryptocurrency products and services, which likely influenced Vermont's decision.

The state's financial regulator cited the likelihood of new federal regulatory guidance as a reason for dropping the legal action, stating that it would be most efficient and in the best interests of justice to rescind the pending order without prejudice. This move by Vermont is significant as it was one of the ten states that had launched legal proceedings against Coinbase on the same day the SEC filed its lawsuit in June 2023. The show cause order had demanded that Coinbase provide a reason why the courts shouldn’t direct them to halt the staking service.

Coinbase's chief legal officer, Paul Grewal, welcomed Vermont's decision, stating that staking services are not securities and that the state had embraced progress by providing clarity for its citizens who own digital assets. Grewal also called on other states with staking actions to follow Vermont's example and urged Congress to pass comprehensive legislation that takes into account the novel features of digital assets, such as staking.

The decision by Vermont to drop its legal action against Coinbase is part of a broader trend of firms facing legal action from the SEC having their cases dismissed in the wake of former SEC Chair Gary Gensler's resignation on January 20. This shift in regulatory stance may signal a more favorable environment for the cryptocurrency industry, as the SEC and other regulatory bodies work to provide clearer guidance on the regulation of digital assets. The dismissal of legal actions against Coinbase by both the SEC and Vermont highlights the evolving regulatory landscape for cryptocurrencies, with a growing emphasis on providing clear and comprehensive guidelines for the industry. This development is likely to encourage other states to reconsider their legal actions against Coinbase and other crypto firms, fostering a more supportive environment for digital asset innovation and growth.