TLDR
- Echoing the actions of Vermont and South Carolina, Kentucky has ended its legal challenge against Coinbase regarding its staking services.
- This legal withdrawal happened soon after Kentucky enacted House Bill 701, a law supportive of digital asset ownership.
- There are still seven states that have ongoing cases against Coinbase.
- Coinbase's Chief Legal Officer, Paul Grewal, is campaigning for overarching federal crypto laws to take the place of current state-wise regulations.
- These legal withdrawals come on the heels of the SEC's February decision to end its case against Coinbase.
Joining recent decisions by other states, Kentucky is the latest to conclude its case against Coinbase, contesting their staking operations previously accused of violating state security regulations.
Kentucky is the third state in recent times to retreat from pursuing claims against Coinbase, with Vermont and South Carolina having done so just days apart.
This legal backtrack in Kentucky closely succeeded Governor Andy Beshear signing into law bipartisan legislation that safeguards digital asset transactions like mining and staking from being regulated as securities.
Paul Grewal of Coinbase took to social media to praise the dismissal, highlighting a trend of states standing up for consumer rights and prudent legal practices.
@GovAndyBeshear Mirroring actions from Vermont and South Carolina, Kentucky's Department of Financial Institutions has similarly dismissed the staking-related lawsuit. @coinbase Congress needs to step in and standardize market regulations to avoid the need for lawsuits and state-specific rules. https://t.co/LyCy2iLS20
— paulgrewal.eth (@iampaulgrewal) March 31, 2025
Filed as part of a bigger push involving multiple states, Kentucky's lawsuit was initiated in June 2023, synchronizing with a federal case by the SEC accusing Coinbase of securities law breaches.
State authorities once argued that Coinbase's staking program was an unregistered securities offering, essentially providing an investment service without proper legal protocols.
Having seen a $2 million loss in returns due to the legal block on staking services, South Carolina dropping its case led to an immediate restoration of these services by Coinbase.
Federal Dropping of Case Influences State Actions
The change began in February when the SEC chose to cease its complaint against Coinbase, a move aimed at accommodating evolving crypto regulations.
Developments at the federal level show a warming attitude towards crypto, with the SEC's Acting Chair Mark Uyeda taking a less aggressive stance than his predecessor.
Kentucky's recently passed legislation, House Bill 701, also affirms the legality of managing one's cryptocurrency and protects those operating network nodes.
Staking rewards are also exempted from money transmitter regulations under this law, which saw unanimous passage in Kentucky's legislature, showcasing cross-party support.
Despite Coinbase's legal triumphs, other states like California, New Jersey, Illinois, Washington, Alabama, Maryland, and Wisconsin continue to pursue litigation over staking services.
Grewal has expressed dissatisfaction with the piecemeal regulatory approach, urging Congress to act quickly to establish a federal market framework.
The fragmented state-by-state regulation presents obstacles for cryptocurrency firms operating nationwide, as jurisdiction-specific staking rules vary significantly.
Enjoying a series of victories against regulatory bodies, Coinbase has also taken steps towards international diversification, including re-entry into the Indian market and pursuits in acquiring Deribit.
Lawmakers in Kentucky are exploring further supportive cryptocurrency legislation, including a provision for the state to invest in Bitcoin, reinforcing its position as a crypto-friendly region.
Maisie, a seasoned journalist in finance and cryptocurrency, has contributed to various platforms, including her position as Editor in Chief at Blockfresh.com.
