Kentucky has officially withdrawn its lawsuit against Coinbase regarding the exchange’s crypto-staking services.
A joint document filed on March 31 indicates that the state’s Department of Financial Institutions has dismissed the case without prejudice, reflecting a significant shift in regulatory attitudes.
Paul Grewal, Coinbase’s Chief Legal Officer, responded by underscoring the growing support for cryptocurrency. He noted that Kentucky’s decision aligns with similar recent actions taken by Vermont and South Carolina.
Grewal stressed the importance of Congress establishing a national regulatory framework, arguing that the current inconsistency of state lawsuits is inefficient and unsustainable.
In February, the US Securities and Exchange Commission (SEC) also dropped its lawsuit against Coinbase, paving the way for other states to take similar steps. Vermont and South Carolina were the first to act, formally withdrawing their claims against the exchange last month.
The original lawsuits arose from a coordinated enforcement initiative by ten US states in 2023, which claimed that Coinbase’s staking services were akin to unregistered securities offerings.
While three states have now retracted their claims, seven states, including California, New Jersey, Illinois, Washington, Alabama, Maryland, and Wisconsin, still have ongoing cases against the crypto trading platform.
Concerns Surrounding Coinbase Staking
Despite these legal triumphs, Coinbase is facing scrutiny within the crypto community due to its increasing dominance in Ethereum staking.
Critics are concerned that the exchange’s status as the largest node operator on the network could pose a threat to decentralization.
A recent report from Coinbase stated that it manages over 3.84 million ETH staked across 120,000 validators, which represents 11.42% of all staked ETH as of March 4.
While this scale contributes to system reliability and uptime, analysts caution that it also introduces risks of centralization.
The crypto advocacy group OG Club DAO warned that ETH staking could increasingly favor traditional financial interests as institutional adoption rises, potentially undermining the network’s neutrality and its ability to resist censorship.
The DAO remarked:
“The ETH staking game is a tricky one. Embracing large players brings more capital & security—but if a few dominate the network, it’s no longer the Ethereum we intended to support.”
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