Kentucky has officially withdrawn its lawsuit against Coinbase concerning staking services, marking it as the third state in the U.S. to drop legal action against the exchange recently.
On March 31, the Kentucky Department of Financial Institutions submitted a joint stipulation of dismissal, bringing an end to its case that accused Coinbase of providing unregistered securities via its staking program.
In response, Coinbase’s Chief Legal Officer, Paul Grewal, expressed the need for federal clarity on social media.
“It’s critical for Congress to put an end to this litigation-driven, state-by-state approach and establish a federal market structure law as soon as possible,” he noted.
Kentucky’s decision follows similar retractions from Vermont and South Carolina. Vermont withdrew on March 14, referencing the dismissal of the U.S. Securities and Exchange Commission’s federal case and the urgent need for clearer regulations on a national level.
Earlier this year, the SEC set a precedent by voluntarily dismissing its lawsuit against Coinbase on February 27. The agency stated that this decision would aid its broader initiatives to reconsider and redefine its strategy towards crypto regulation.
South Carolina followed suit, dismissing its case just days later, with Grewal highlighting that local users lost approximately $2 million in staking rewards due to the prohibition.
Shortly after the lawsuit was dropped, Coinbase confirmed that staking was once again available in South Carolina through all access points.
A coalition of ten states initially targeted Coinbase in June 2023 after the SEC filed its lawsuit. At that time, regulators contended that Coinbase’s staking program constituted an unregistered securities offering as users received rewards by delegating their tokens on the platform.
Currently, seven states—California, New Jersey, Illinois, Washington, Alabama, Maryland, and Wisconsin—still have ongoing actions against Coinbase.
Kentucky’s decision to withdraw the lawsuit occurred less than a week after Governor Andy Beshear enacted the state’s “Bitcoin Rights” bill. This legislation secures the right to self-custody, enables residents to operate blockchain nodes, and protects mining endeavors from discriminatory regulations.
Additionally, lawmakers are exploring a separate proposal that would permit the state to allocate up to 10% of its surplus reserves into Bitcoin.