South Carolina dismissed its lawsuit against crypto exchange Coinbase, becoming the second state to drop its staking-related case after the US watchdog’s shift toward the industry. The exchange’s Chief Legal Officer (CLO) called the development a “victory” for crypto investors.
South Carolina Drops Coinbase Staking Services Lawsuit
On Thursday, Coinbase’s CLO, Paul Grewal, revealed that South Carolina had dismissed its case against the crypto exchange in a joint stipulation between the state’s Attorney General Securities Division and the platform.
Grewal affirmed that “the dominoes keep falling” as South Carolina became the second state to dismiss its staking lawsuit against Coinbase.
Joint stipulation between South Carolina Attorney General’s Securities Division and Coinbase. Source: South Carolina Attorney General
For context, in June 2023, 10 US state regulators, including Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin, accused the crypto exchange of violating securities law.
The multi-state task force issued a Show Cause Order against Coinbase, arguing that it violated securities law “by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities.”
On the same day, the Securities and Exchange Commission (SEC) sued Coinbase for offering unregistered securities and failing to register the offer and sale of its crypto asset staking-as-a-service program.
Earlier this month, Vermont dropped its lawsuit regarding staking services, citing the SEC’s dismissal of its case against Coinbase and the ongoing regulatory changes in the Commission.
“In light of the dismissal of the Federal Action and the likelihood of new federal regulatory guidance, the Division believes it would be most efficient and in the best interests of justice to rescind the pending Show Cause Order, without prejudice,” the March 13 court document reads.
IS The US Crypto Landscape Becoming Less Hostile?
Coinbase’s CLO noted that South Carolinians lost over $2 million from staking rewards due to this case and considers yesterday’s dismissal a victory for the 52 million American crypto investors, who “deserve commonsense consumer protections and clear rules.”
Grewal also applauded South Carolina’s decision, hoping it is “a sign of things to come in the few states left that restrict staking.”
Notably, the US crypto landscape has become friendlier under the new administration. The SEC, led by acting chair Mark Uyeda, is working on creating a clear regulatory framework, seeking public input to address the long-standing regulatory challenges it has faced.
Amid the ongoing changes, the Commission has dismissed or paused several key crypto lawsuits over the past two months, including Coinbase, Robinhood, and Binance. The regulatory agency continued its crypto litigation retreat on Thursday, officially dropping three cases and closing one investigation.
As journalist and Podcast Host Eleanor Terrett reported, the SEC closed its investigation into Crypto.com with no enforcement action and “formally announced litigation dismissal against Kraken, Consensys, and Cumberland.
Terret noted that the Ripple lawsuit wasn’t included because “it is slightly different to these other cases in that (…) the SEC now has to go to the Southern District and ask Judge Torres to lift the standard injunction. Once that is done, they can vote on everything at once, including the withdrawing of the appeal.”
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