SPRINGFIELD, Ill. (WCIA) – Illinois Secretary of State Alexi Giannoulias is taking legal action against a cryptocurrency exchange platform.
Giannoulias’ Securities Department is asking cryptocurrency company Coinbase to appear at a hearing for allegedly not registering its stakings with the department as a security. Officials say without registering, investors were not given useful information to evaluate the risks of staking.
Staking is the concept of holding onto digital assets like cryptocurrency on a blockchain. By committing to not transferring the currency, it helps the blockchain verify transactions faster and gives the holder rewards. Through exchanges like Coinbase, investors could stake any amount of coin on their website or app without validator software.
The Securites Department estimates more than 140,000 accounts in Illinois held stakings from Coinbase. Officials estimate those accounts’ investment were worth $228,000,000 in March.
Illinois worked with a taskforce of nine other states’ security regulators in investigating Coinbase’s staking. The company also faces a lawsuit filed Tuesday from the U.S. Securities and Exchange Commission.
Giannoulias believes the legal action will help Illinoisans make smarter financial decisions.
“This action will protect consumers and investors to ensure they can make informed and safe decisions in Illinois and across the nation,” Giannoulias said. “Illinoisans who invest their money in Coinbase or any other digital asset trading business deserve both security and transparency and my office intends to hold crypto companies to the highest standards.”
A Coinbase spokesperson told WCIA they are reviewing all action from the security regulators and hope to have productive conversations. They do not believe they violated Illinois’ securities laws.
“We are confident that our staking services are not securities under federal or state law,” the spokesperson said.
Coinbase is not a part of the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation programs. This means that investors have no protection from loss of investing in Coinbase.
The public hearing with Coinbase is scheduled for Aug. 8. in Chicago.