California Attorney General Rob Bonta announced on October 16 that Fidelity's crypto arm has agreed to pay $500,000 to settle state claims arising from a restriction that let Californians buy and sell bitcoin on the platform but barred them from moving it out. From late 2022 to 2025, the only way to get crypto into a personal wallet was to sell the holdings, pay any applicable tax, and buy again elsewhere.

"Investors have a legal right to full, unrestricted access to what they buy," Bonta said. Fidelity enabled withdrawals in 2025, and none of the $500,000 goes to customers.

The settlement's headline figures: $500,000 paid to the attorney general's office rather than customers; roughly two and a half years without crypto withdrawals in California; a similar Robinhood Crypto case settled in 2024; and a $2,000 default daily withdrawal limit at Fidelity today.

Why California Says Crypto You Can't Withdraw Wasn't Delivered

California's Commodity Law bans commodity contracts made mainly for speculation or investment unless the dealer physically delivers the commodity within 28 days of payment. The state's position is that cryptocurrency counts as delivered only once the buyer can withdraw it from the platform. A balance that can only be traded where it sits never passes that test.

The state has applied this rule before. According to the attorney general's office, the Fidelity case grew out of California's September 2024 settlement with Robinhood Crypto over a similar block on withdrawals. During that inquiry, investigators learned that Fidelity's crypto arm had kept the same restriction through its first two years. The Fidelity deal is California's second settlement with a major retail platform over blocked crypto withdrawals, and it lands roughly two years after the first.

The restriction carried real costs for customers who wanted out. Selling crypto to move it counts as disposing of a digital asset, and the IRS requires any gain or loss to be reported. Buying back elsewhere meant another round of trading fees and time out of the market while the money moved. Customers who wanted to relocate coins they planned to keep holding still had to report a sale.

Fidelity Says It Was Waiting on New York

When California's Department of Justice contacted the firm, Fidelity Digital Asset Services confirmed it did not allow withdrawals. It said it was waiting for permission from the New York Department of Financial Services, its regulator at the time. New York approved transfers in April 2025.

The sequence of events, per the attorney general's announcement and the executed settlement agreement:

• November 2022 — California retail customers can buy and sell crypto on Fidelity, but can't withdraw it.
• September 2024 — California settles with Robinhood Crypto over a similar restriction; Fidelity's comes to light during that investigation.
• April 2025 — New York approves transfers, and Fidelity starts rolling them out.
• June 2025 — Withdrawals reach all California customers.
• December 12, 2025 — Fidelity's crypto arm becomes a national trust bank regulated by the Office of the Comptroller of the Currency, now called Fidelity Digital Assets, National Association.
• October 14, 2026 — The settlement is signed.
• October 16, 2026 — Bonta announces the deal.

The trust-bank conversion is why the signed agreement names Fidelity Digital Assets, National Association, rather than the company California originally investigated. It also shifted the crypto arm's primary regulator from a state agency to a federal one.

What Bonta Said

Investors are legally entitled to unrestricted access to the crypto they buy, and Fidelity's restriction left Californians stuck, according to the attorney general's office.

What the Agreement Allows

Fidelity can still restrict or block transfers to protect its platform or account holders. If it ever drops withdrawals for retail customers, it must give Californians reasonable written notice. Its standard daily withdrawal limit is $2,000, a cap that means moving larger balances takes multiple daily withdrawals.

Where the $500,000 Goes

The payment goes to the attorney general's office, covering its investigation costs and settling the state's claims. There is no fund for customers, including those who sold to move their coins between November 2022 and June 2025. The agreement states that it neither creates new rights for customers nor takes away any private legal rights they already had.

Fidelity admitted no wrongdoing and denies violating California law. No court has ruled on whether the restriction was illegal. And because withdrawals had reached all California customers by June 2025, the settlement addresses a restriction that had already been fully lifted more than a year before the deal was signed.

What Moving Crypto Off Fidelity Involves Today

According to Fidelity's withdrawal help page, Fidelity Crypto customers can send BTC, ETH, LTC, and SOL on each coin's main network, plus FIDD, Fidelity's dollar stablecoin, on Ethereum, subject to availability in their state.

Two of Fidelity's own recommendations stand out. Customers are advised to send about $1 to a new address and confirm it arrives before moving the rest. Those who never plan to move coins out can switch on a transfer lock that blocks withdrawals from the account entirely.

Withdrawals themselves aren't taxable, but the network fee is paid by selling a sliver of the crypto being sent. Fidelity reports that sale on Form 1099-DA and uses tax lots first-in, first-out, with no option to choose. Exit terms are therefore part of the overall cost picture when comparing bitcoin purchases across platforms.

Why Crypto IRAs Still Can't Send Coins

The settlement's withdrawal terms don't extend to Fidelity Crypto IRAs. The agreement exempts tax-advantaged accounts governed by federal law, citing the IRA section of the tax code and federal rules on how assets move tax-free between retirement accounts. Fidelity's IRA guidance says these accounts can't transfer crypto at all; money comes out in dollars, through a linked Fidelity brokerage IRA, as its distribution instructions explain.

Fidelity plans to bring crypto IRAs to California, according to the agreement, which gives no launch date. That timing is the main detail left to watch for Californians interested in the product.

How the Settlement Maps to Customers' Situations

• Sold crypto on Fidelity to move it between 2022 and 2025: The settlement pays customers nothing, and by its terms it doesn't take away any private legal they already had.
• Want to move coins now: Fidelity's guidance is to add a wallet address a few days ahead, send a $1 test, and plan around the $2,000 daily cap unless it is raised.
• Waiting for a Fidelity crypto IRA in California: It is planned but has no date, and coins held in it won't be transferable to a personal wallet.

This article is provided for informational purposes only and does not constitute legal, tax, financial, or investment advice.