Kentucky Joins South Carolina, Vermont in Dismissing Coinbase Lawsuits
Kentucky has formally dismissed its lawsuit against Coinbase's staking service, just days after passing pro-crypto legislation. The state follows South Carolina and Vermont in dropping out of lawsuits involving the largest cryptocurrency exchange in the United States.
The Kentucky Department of Financial Institutions filed a joint ruling on Monday, ending its legal action against Coinbase, which had been accused of violating state securities laws over its staking program.
"We need to end this fragmented litigation approach. Instead, Congress should focus on creating a clear and unified federal regulatory framework," Coinbase Chief Legal Officer Paul Grewal posted on X after the lawsuit was dismissed.
Coinbase Still Faces Cease-and-Desist Orders from Multiple States
Despite recent favorable rulings, Coinbase still faces restraining orders from seven states, including California, New Jersey, Illinois, Washington, Alabama, Maryland, and Wisconsin.
The lawsuit was originally part of a multi-state legal effort initiated by the U.S. Securities and Exchange Commission (SEC) in June 2023, accusing Coinbase of providing financial services without a valid license.
However, states such as Vermont, South Carolina, and Kentucky have each dropped out over the past month. Vermont was the first state to drop the lawsuit on March 14, citing the need for clearer regulatory framework at the federal level. South Carolina followed suit just days later, when Coinbase's chief legal officer revealed that residents of the state had lost about $2 million in staking rewards due to the ban.
“We are seeing a significant shift in how states approach cryptocurrency,” said Paul Grewal. “Kentucky’s decision is a big win for consumers, innovation, and economic opportunity.”
Kentucky Passes Law Protecting Crypto Ownership
The decision to dismiss the lawsuit against Coinbase comes shortly after Kentucky Governor Andy Beshear signed House Bill 701, a landmark piece of legislation that aims to protect people’s rights to own digital assets.
The bill confirms that self-custody of cryptocurrency is legal, while exempting activities like mining, staking, and operating blockchain nodes from securities regulations.
HB701 also ensures that staking rewards are not subject to state money transmission regulations, making it easier for staking on platforms like Coinbase.
The bill received strong support from both the Kentucky House and Senate, showing a rare cross-party consensus on digital asset ownership.