Kentucky dismisses Coinbase lawsuit amid pro-crypto legislation

Kentucky has officially dismissed its lawsuit against Coinbase over staking services, joining South Carolina and Vermont in retreating from similar legal actions.

On Monday, the Kentucky Department of Financial Institutions filed a joint stipulation of dismissal, marking the end of its case against the cryptocurrency exchange.

The lawsuit had accused Coinbase’s staking program of violating state securities laws by operating without proper registration.

“Congress needs to end this litigation-driven, state-by-state approach with a federal market structure law ASAP,” stated Coinbase Chief Legal Officer Paul Grewal in response to the dismissal on X.

Grewal also emphasised that Kentucky’s decision, following Vermont and South Carolina, reflects growing support for consumers and innovation across party lines.

The multistate effort against Coinbase began in June 2023, coinciding with the U.S. Securities and Exchange Commission’s (SEC) lawsuit against the company.

Regulators argued that Coinbase’s staking program functioned as an unregistered securities offering by pooling customer tokens in proof-of-stake networks.

Vermont exited the case on March 14, citing the dismissal of the federal lawsuit and the need for clearer national regulation.

South Carolina followed shortly after, with Grewal noting that residents lost approximately $2 million in staking rewards due to restrictions.

These state-level pullbacks align with broader regulatory shifts, including the SEC’s February decision to drop its case against Coinbase under Acting Chair Mark Uyeda’s more conciliatory stance toward cryptocurrency.

Despite these developments, seven states—including California, New Jersey, and Illinois—continue enforcement actions against Coinbase.

Kentucky’s dismissal coincides with Governor Andy Beshear signing House Bill 701 into law last week.

The legislation protects digital asset rights by affirming self-custody legality and exempting activities like mining and staking from securities laws.

HB701 also shields blockchain node operators and exempts staking rewards from state money transmitter rules.

The bill passed unanimously in both chambers, signaling bipartisan support for crypto-friendly policies.

These legal and legislative shifts highlight evolving attitudes toward cryptocurrency regulation in the United States.

“This is not just a victory for us but for American consumers,” remarked Grewal after South Carolina’s dismissal.

However, ongoing lawsuits in other states suggest regulatory clarity remains a work in progress.