- Kentucky, Vermont, and South Carolina drop Coinbase staking lawsuits, easing regulations.
- Coinbase calls for federal regulation after Kentucky drops its staking lawsuit.
- Kentucky’s new crypto law supports staking and mining, ensuring clearer digital asset rules.
Kentucky filed a joint dismissal that ended its lawsuit against Coinbase, with the state changing its stance on cryptocurrency staking services. A joint dismissal submitted by the Kentucky Department of Financial Institutions on Monday terminated an ongoing legal dispute against Coinbase operating as an unregistered securities program. The dismissal aligns Kentucky with Vermont and South Carolina, indicating a statewide shift in cryptocurrency regulatory policies on April 1, 2025.
The dismissal follows Governor Andy Beshear’s signing of House Bill 701, a pro-crypto law enacted just days earlier. This legislation clarifies that staking and mining do not fall under securities regulations, paving the way for Kentucky to reverse its stance. Coinbase Chief Legal Officer Paul Grewal hailed the decision as a victory for consumers and innovation, noting on X that it supports economic opportunity across state.
The lawsuit became part of a multistate operation initiated in June 2023, along with a U.S. Securities and Exchange Commission (SEC) lawsuit, alleging that Coinbase’s staking services violated state laws.
States Reassess Crypto Staking Policies
Vermont kicked off the trend by dropping the Coinbase lawsuit on March 14, citing the SEC’s dismissal of its federal case in February and the prospect of clearer national guidelines. South Carolina followed shortly after, with Grewal reporting that residents lost about $2 million in staking rewards due to the ban. Kentucky’s action now brings the total to three states stepping back from enforcement, easing restrictions on Coinbase’s staking services and hinting at a thawing regulatory climate.
However, seven states, namely California, New Jersey, Illinois, Washington, Alabama, Maryland, and Wisconsin, continue to file legal actions against Coinbase. However, the SEC’s transition to Acting Chair Mark Uyeda has signaled an opportunity for crypto-related legal challenges to be dismissed as he advocates favorable enforcement.
Grewal asked Congress to establish federal market structure laws, citing that the present state-based legal system could create inconsistent outcomes. The regulator stressed how standard regulations throughout the industry to safeguard consumers while fostering industry growth.
Related: SEC Drops Coinbase Case, Ripple Ruling May Follow Soon
Coinbase Gains Momentum Amid Changing Landscape
Coinbase reacted quickly to regulatory victories by starting stake service operations in South Carolina immediately following the dismissal of the court order. The exchange uses Freedom of Information Act requests to battle past SEC and FDIC regulatory actions and pursue larger objectives. Further, Coinbase announced its return to India in 2025 and plans to purchase Deribit as it shows an optimistic outlook during legal disputes.
The state of Kentucky supports these advances through House Bill 701, providing customer ownership rights and exemption for staking reward payments from money transmitter regulations. The law received uniform support from all House members, demonstrating broad agreement on digital assets.
