Kentucky Drops Lawsuit Against Coinbase As Crypto Regulation Shifts

In a new development, Kentucky’s Department of Financial Institutions has officially dropped its lawsuit against Coinbase, a leading crypto exchange. The regulatory agency initially accused the trading platform of breaking state securities laws by offering staking services. 

The case has been dismissed without prejudice, which is paused for now. However, state regulators can reopen it in the future if they choose. This move is part of a growing trend, as other states have also stepped back from similar lawsuits. 

However, several states still have active cases against Coinbase, and the larger concerns over crypto regulations are far from settled.  

State Lawsuits Against Coinbase Ends, But Many Still Remain Open

Kentucky is the latest state to end its legal action against Coinbase. Vermont ended its lawsuit in March, and South Carolina followed two weeks later. However, not all states have followed this trend. Seven states, including Alabama, California, Illinois, Maryland, New Jersey, Washington, and Wisconsin, still have open cases against Coinbase. 

These lawsuits argue that staking services should be treated as securities and regulated under existing laws. Coinbase, on the other hand, insisted that its staking program does not qualify as a security and should not be subject to these restrictions.  

Following Kentucky’s decision, Coinbase’s Chief Legal Officer, Paul Grewal, urged Congress to intervene. He criticized the state-by-state legal battles and called for a unified federal crypto regulatory framework. He argued that without clear national rules, crypto firms will continue to face uncertainty and inconsistent enforcement across the U.S.

The SEC’s Changing Approach to Crypto  

The lawsuits against Coinbase were part of a broader crackdown led by the U.S. Securities and Exchange Commission (SEC). In June 2023, the SEC sued the exchange, claiming it offered unregistered securities. However, Coinbase denied the accusations and fought back in court. 

Later, in February 2025, the SEC dropped the case, marking a major win for Coinbase and the crypto industry. The SEC has also withdrawn lawsuits against other crypto firms, including Robinhood, Kraken, Ripple, Consensys, and OpenSea. This shift comes as the SEC, under acting chair Mark Uyeda, softened its stance on crypto enforcement.

Kentucky Embraces New Crypto-Friendly Law  

Kentucky dropped the lawsuit a few days after Governor Andy Beshear signed the “Bitcoin Rights” bill. This new law protects crypto’s self-custody, allows digital assets to be used for payments, and supports crypto mining. 

It also prevents local regulators from unfairly targeting the crypto industry, offering relief for staking and mining services. As more states back out of legal fights and new pro-crypto laws are introduced, the U.S. approach to digital assets might change. 

However, with seven states still pursuing lawsuits against Coinbase, it is clear that the fight over crypto regulation is far from over.