If you live in California, you cannot open new staking positions on Coinbase. The platform suspended its staking program for California residents on June 6, 2023, after the state’s financial regulator ordered it to stop, and that restriction is still in effect in 2026. Positions you staked before that date keep earning rewards, and you can unstake at any time, but you cannot add new principal or restake what you withdraw.
What You Can and Can’t Do on Coinbase
Coinbase uses your account’s residential address and ID to decide whether California rules apply to you. If you’re flagged as a California resident, these are the rules the platform enforces:1Coinbase. Staking Eligibility
- No new staking of any supported asset. Ethereum, Solana, and every other staking asset are off-limits for new positions.
- Positions staked before June 6, 2023 remain active and continue to earn.
- Anything staked on or after June 6, 2023, including rewards that had accrued on those positions, was automatically unstaked by the platform.
- Rewards on legacy positions are paid out but do not compound. They sit in a liquid state rather than rolling back into the staked balance.
- You can unstake your legacy positions at any time, but once unstaked, neither the principal nor the rewards can be restaked.
The no-compounding rule is easy to overlook. On platforms or in states without this restriction, rewards typically roll back into the staked balance and grow your position over time. In California, the staked balance stays frozen at whatever it held before the cutoff, and rewards accumulate separately.
Unstaking a Legacy Position
You can exit a legacy staking position without any penalty from Coinbase, but the mechanics depend on the asset. Most proof-of-stake networks impose an unbonding period during which the tokens are locked and no longer earning. Ethereum is the clearest example: the time to unstake depends on network congestion, and Coinbase does not guarantee a specific completion window.2Coinbase. Staking Risks If you need the ETH immediately, Coinbase offers an instant unstaking option for a fee disclosed at the time of the request. Assets with shorter or no unbonding periods are generally faster and free.
Treat unstaking as a one-way door. Once your tokens leave the staked state, California rules prevent you from putting them back, and that applies to both principal and earned rewards. If there’s any chance the restriction gets lifted and you’d want to resume, that decision needs to come before you unstake, not after.
Why California Blocks New Staking
The California Department of Financial Protection and Innovation (DFPI) brought an action against Coinbase Global, Inc. and Coinbase, Inc. on June 6, 2023, alleging the staking rewards program amounted to the offer and sale of unregistered securities under state law.3California Department of Financial Protection and Innovation. DFPI Issues Action Against Coinbase Citing Staking Rewards Program Violates Securities Law The order requires Coinbase to stop enrolling new California users in the program unless it either qualifies the offering with regulators or secures an exemption.4California Department of Financial Protection and Innovation. Coinbase Global, Inc. and Coinbase, Inc. Coinbase has consistently maintained that staking is not a security. The restriction is a regulatory block, not a Coinbase product decision.
Where Things Stand in 2026
The DFPI case has not been resolved. As of January 2026, Coinbase was publicly pressing California to drop the lawsuit so it could restart the rewards program. The SEC and several other states have dropped their own cases against Coinbase’s staking services, and roughly 40 states never objected. California, Maryland, New Jersey, and Wisconsin continue to restrict the program.1Coinbase. Staking Eligibility
In March 2026, the SEC and the Commodity Futures Trading Commission issued a joint interpretation on how federal securities laws apply to protocol staking of non-security crypto assets.5U.S. Securities and Exchange Commission. SEC Clarifies the Application of Federal Securities Laws to Crypto Assets That interpretation covers the same activity at the center of the DFPI dispute. Whether it moves California remains an open question, but the federal direction is more permissive than it was in 2023.
Self-Custody Staking as an Alternative
The DFPI order targets Coinbase’s staking-as-a-service program. It does not prohibit a California resident from staking cryptocurrency on their own. If you hold tokens in a self-custody wallet and stake directly with the protocol or through a non-custodial interface, you aren’t using the service the DFPI found objectionable.
Hardware wallets like Ledger let you stake certain assets while keeping private keys offline. You connect to third-party staking providers through the wallet, compare rates, and delegate without handing custody to an intermediary. The March 2026 SEC and CFTC interpretation adds some federal comfort for protocol-level staking of non-security crypto assets.5U.S. Securities and Exchange Commission. SEC Clarifies the Application of Federal Securities Laws to Crypto Assets
The tradeoffs are real. You’re responsible for securing your own keys, picking a reliable validator, and understanding slashing risk, where the network can destroy a portion of your staked tokens if your validator misbehaves. There is no customer support line. Tax obligations are the same as on Coinbase. For technically comfortable users, self-custody staking is a legitimate path around the restriction. For everyone else, it introduces risks a custodial platform normally absorbs for you.
Taxes on the Rewards You’re Still Earning
Legacy positions keep paying rewards, and each reward is a taxable event. IRS Revenue Ruling 2023-14 treats staking rewards as ordinary income, taxed at the fair market value of the tokens on the date and time you gain “dominion and control” over them.6Internal Revenue Service. Revenue Ruling 2023-14 In practice, that’s the moment the reward is credited to your account and you could sell or transfer it. You owe income tax on its dollar value at that instant.
That dollar value also becomes your cost basis for those tokens. If you later sell them for more, you owe capital gains tax on the difference. If you sell for less, you have a capital loss. Dispositions go on Form 8949 and Schedule D. Each reward payout creates its own tax lot with its own timestamp and valuation, so recordkeeping gets tedious if rewards hit daily or weekly. Some exchanges issue Form 1099-MISC for staking income, aggregating the year’s total without breaking out individual payouts. Keep your own records regardless. California generally conforms to federal income tax treatment for cryptocurrency, so staking rewards show up on your state return too.