Fidelity Crypto Settlement: California's 28-Day Withdrawal Rule Explained

California announced a $500,000 settlement with Fidelity Digital Asset Services on October 16, 2026, resolving allegations that its former withdrawal restrictions violated the California Commodity Law. The company did not admit liability and disputes that it violated California law.

 

The statute prohibits a commodity contract entered into primarily for speculation or investment unless the dealer delivers the commodity within 28 days of payment, and the Attorney General treats delivery of a digital asset as occurring only once the customer can move it off the platform. That reading reaches any platform that sells digital assets it does not allow customers to withdraw.

Why California Investigated Fidelity's Crypto Platform

California's Department of Justice investigated Fidelity Digital Asset Services after identifying restrictions on customers' ability to transfer cryptocurrency off its platform. From November 2022 through April 2025, California retail customers could buy and sell cryptocurrency but could not transfer those assets directly to external wallets. Fidelity explained that the functionality required approval from the New York Department of Financial Services.

Fidelity Agreed to a $500,000 Settlement

Under the agreement, Fidelity Digital Assets, National Association, as successor to Fidelity Digital Asset Services, agreed to pay $500,000 to resolve the California Attorney General's specified potential claims. The company denied wrongdoing and entered into the agreement without admitting any violation of law.

How California's 28-Day Delivery Rule Applies to Crypto

California's Commodity Law generally prohibits certain commodity contracts entered into primarily for investment or speculation unless physical delivery occurs within 28 days of payment. For covered cryptocurrency transactions, California regulators consider the customer's ability to withdraw purchased assets from the dealer's platform an important part of physical delivery. The rule does not establish a universal 28-day withdrawal deadline for every cryptocurrency transaction.

What the Settlement Requires

Fidelity's successor confirms that California customers can transfer eligible cryptocurrency to external wallets, subject to applicable laws and security restrictions. The agreement also addresses notice if retail transfer functionality is discontinued. It expressly recognizes exceptions involving certain tax-advantaged accounts, including crypto IRAs subject to applicable federal requirements.

What Crypto Platforms Should Review

Cryptocurrency platforms serving California customers should evaluate whether their products fall within the state's commodity contract requirements, how digital assets are delivered, and whether customers can transfer eligible assets outside the platform. Businesses should also review customer agreements, withdrawal disclosures, licensing requirements, and the interaction between state regulatory approvals and California commodity law.

State Regulatory Approval Does Not Resolve Every Compliance Question

The Fidelity investigation illustrates how restrictions connected to one state's regulatory approval process may create separate legal questions in another jurisdiction. Crypto businesses operating across state lines should evaluate applicable requirements in each market.

How SJKP Can Help

SJKP can assist cryptocurrency platforms, digital asset businesses, and financial services companies with regulatory compliance, securities and commodities matters, and state-level enforcement risks. Businesses reviewing custody arrangements, customer withdrawal policies, or digital asset operations can work with counsel to evaluate applicable legal requirements.