Washington, DC, 6/7/23 – Yesterday, the SEC sued digital asset exchange Coinbase on a number of counts, including the allegation that Coinbase’s staking services are unlawful. Also yesterday, the Alabama Securities Commission alleged that Coinbase violated securities laws by offering its “staking rewards program” to residents without registration.

The Proof of Stake Alliance does not believe that facilitating individual participation in validating transactions and adding blocks to proof-of-stake blockchain networks constitutes an unregistered investment contract. Participation in a particular consensus mechanism used by a blockchain is not the type of activity that the U.S. securities laws were designed to regulate. In 2020, after productive meetings with the SEC, POSA developed and published recommendations for companies and individuals participating in proof of stake protocols by offering staking services. They were technical services then and they remain technical services today.

As the recently drafted McHenry-Thompson market structure bill seems to recognize, validators and other staking infrastructure providers are not financial intermediaries. They provide ancillary technology services, not financial services. They should be treated as such.  

POSA will continue its work to educate lawmakers and regulators, and to aggressively support all those who participate in proof-of-stake ecosystems.