Vermont Drops Coinbase Staking Case Following Federal Dismissal

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• The Vermont Department of Financial Regulation has rescinded its enforcement action against Coinbase over crypto staking
• The decision follows the dismissal of a related federal case by the SEC on February 28, 2025
• The SEC is now focusing on new regulatory guidance for cryptocurrency products and services

The Vermont Department of Financial Regulation (DFR) has formally withdrawn its Show Cause Order against Coinbase over the classification of staking. The move comes after the U.S. Securities and Exchange Commission (SEC) dropped its lawsuit against Coinbase in federal court late last month. With the SEC now working on new regulatory frameworks for the cryptocurrency industry, Vermont regulators have determined that further enforcement actions at the state level are unnecessary.  

Staking in the Spotlight

Coinbase has faced regulatory scrutiny over its cryptocurrency staking services since June 2023, when the Vermont DFR issued a Show Cause Order requiring the company to justify why its operations should not be shut down. The order alleged that Coinbase’s staking services violated state securities laws and came on the same day that the SEC filed a federal lawsuit against the company in the Southern District of New York, making similar allegations of unregistered securities offerings.

The latter lawsuit became a central legal battle over whether cryptocurrency staking services should be regulated under traditional securities laws, a situation made all the more pressing by Ethereum’s switch from proof-of-work to proof-of-stake in 2022.

Regulators Back Off Amid Federal Case Dismissal

According to a newly filed motion in the Vermont case, the federal case was dismissed with prejudice on February 28, 2025, after a stipulation agreement was reached between Coinbase and the SEC:  

In light of the dismissal of the Federal Action and the likelihood of new federal regulatory guidance, the Division believes it would be most efficient and in the best interests of justice to rescind the pending Show Cause Order, without prejudice.

This decision aligns with recent shifts in federal oversight in line with the more crypto-friendly Trump administration; the SEC has announced the creation of a new task force to establish clearer rules for cryptocurrency regulation with a view to adoption rather than banishment.

Coinbase’s legal chief, Paul Grewal, celebrated the decision on X, but warned that the war isn’t over:

Our work isn’t over. Congress must seize the bipartisan momentum we’re seeing across the House and Senate to pass comprehensive legislation that takes into account the novel features of digital assets, such as staking. And the other states with staking actions should take a page…

— paulgrewal.eth (@iampaulgrewal) March 13, 2025

As the cryptocurrency industry awaits new federal guidelines, this case highlights the shifting landscape of digital asset regulation. For now, Coinbase has secured a significant legal victory, though broader regulatory challenges remain on the horizon.