Residents across five U.S. states have missed substantial cryptocurrency earnings due to ongoing regulatory barriers, according to leading crypto exchange.
Coinbase revealed that users in California, New Jersey, Maryland, Wisconsin, and South Carolina have collectively lost more than $90 million in potential staking rewards since June 2023 due to state regulatory actions against the platform's staking services.
On April 25, the largest U.S.-based digital asset exchange publicly called on these five states to remove their restrictions, arguing that such action would align them with the Securities and Exchange Commission (SEC), which earlier this year dropped its enforcement action against Coinbase's staking operations.
"The holdouts actively harm their consumers by barring their access to safe wealth generation tools like staking. They've cost these Americans tens of millions of dollars in potential earnings – and counting," stated Paul Grewal, Coinbase's chief legal officer, in a post on social media platform X.
Regulatory Landscape Shifting
The regulatory environment for cryptocurrency staking has undergone significant changes in recent months. Following the SEC's decision to abandon its enforcement action, several states including Illinois, Kentucky, South Carolina, Vermont, and Alabama withdrew similar restrictions, creating a fragmented regulatory landscape across the country.
Staking allows cryptocurrency holders to earn passive income by committing their assets to support blockchain network operations. The practice has become a fundamental component of many blockchain ecosystems and represents a significant revenue stream for both users and exchanges.
Industry experts note that staking has grown into a multi-billion dollar sector within the broader cryptocurrency ecosystem. According to blockchain analytics firm Staked, the total value of assets staked across major proof-of-stake networks exceeded $300 billion in early 2025.
Consumer Protection Concerns
Coinbase argues that the remaining state restrictions may actually increase consumer risk rather than mitigate it. The exchange warned that affected residents might turn to less regulated or unregulated platforms to access staking services, potentially exposing them to greater security vulnerabilities and fewer consumer protections.
"By singling out Coinbase, these holdout states are arbitrarily picking winners and losers. That's the job of consumers, not state bureaucrats," the company stated in its announcement.
The exchange further emphasized that these cease-and-desist orders were originally designed to combat fraudulent operations, not legitimate financial services offered by licensed platforms.
Broader Industry Implications
The ongoing regulatory discord highlights the challenges facing cryptocurrency businesses operating in the United States. While federal regulators have provided some clarity, state-level disparities continue to create compliance challenges and operational uncertainties.
Financial technology policy researcher Dr. Amanda Wilson of the Digital Finance Institute commented, "This regulatory patchwork creates significant inefficiencies for both businesses and consumers. It demonstrates the need for a more coordinated approach to cryptocurrency regulation across federal and state jurisdictions."
Coinbase maintains that aligning state regulations with federal guidance would benefit residents through increased access to financial tools while promoting safer innovation within the U.S. cryptocurrency sector.
As these regulatory discussions continue, the financial impact on residents in restricted states is expected to grow, with Coinbase estimating potential lost rewards could exceed $150 million by year-end if restrictions remain in place.