Yesterday, the California Department of Financial Protection & Innovation announced that it had issued a desist and refrain order against Coinbase, Inc.    The order alleges that Coinbase's staking rewards program involved the the offer and sale of securities without qualification.  The DFPI describes "staking" as follows:

Staking occurs when investors lock their crypto assets for a set period to help support the operation of a blockchain. In return, the investor is promised more cryptocurrency. Under Coinbase’s staking rewards program, investors deposit crypto assets with Coinbase, which then facilitates the staking of these assets on the blockchain. The program is offered to the public and advertises a return of up to 6 percent on investments. Coinbase pools investors’ crypto assets and employs a team of engineers to operate staking validator nodes to generate staking rewards. Coinbase takes a cut of those profits before sharing them with investors.

The DFPI's order coincides with an announcement by the Securities and Exchange Commission that it has filed a civil complaint in the Southern District of New York against Coinbase for the unregistered  offer and sale of securities in connection with its staking-as-a-service program.  The SEC's complaint also charges Coinbase with operating an unregistered securities exchange, broker, and clearing agency.

The DFPI has notified Coinbase of its intent "to levy administrative penalties against Coinbase for the statutory amount of not more than one thousand dollars ($1,000) for the first violation, and not more than two thousand five hundred dollars ($2,500) for each subsequent violation, or according to proof, for Coinbase’s repeated willful violations of section 25110".  According to the DFPI's press release, more than 600,000 accounts are held by California investors.