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South Carolina Drops Lawsuit Against Coinbase Over Staking Program
South Carolina has officially dismissed its lawsuit against the cryptocurrency exchange Coinbase, which accused the platform of offering unregistered securities through its staking rewards program. This decision marks a significant step forward for Coinbase, particularly after Vermont dropped a similar case earlier this month.
South Carolina’s Case Against Coinbase
The lawsuit, brought forward by South Carolina’s Attorney General’s securities division, was resolved through a joint agreement with Coinbase. According to Coinbase’s Chief Legal Officer, Paul Grewal, this resolution signals progress not only for the company but also for American consumers. Grewal expressed optimism in a statement, noting that the decision could encourage other states with similar restrictions to reconsider their stance on staking services.
“The dominoes keep falling. This is not just a victory for us, but for American consumers, and we hope it’s a sign of things to come in the few states left that restrict staking,” Grewal commented in a March 27 social media post.
Background: Multistate Enforcement Actions
South Carolina was one of ten states that took enforcement actions against Coinbase in June 2023, targeting its staking rewards program. Other states involved in the coordinated effort included California, New Jersey, and Illinois. These actions were part of a broader investigation supported by the U.S. Securities and Exchange Commission (SEC).
The states alleged that Coinbase’s staking service constituted the sale of unregistered securities. Under the program, users deposited cryptocurrency to validate blockchain transactions and earned staking rewards, while Coinbase retained a portion of those rewards. Each state issued cease-and-desist orders, arguing that the staking program needed to comply with registration requirements or meet exemption rules under their respective securities laws.
Impact of Restrictions
Paul Grewal highlighted that South Carolina residents lost an estimated $2 million in staking rewards due to the restrictions. He called on other states involved in similar cases—such as Alabama, California, Illinois, Kentucky, Maryland, New Jersey, Washington, and Wisconsin—to reconsider their positions.
Momentum Shift: SEC Case Dropped
The SEC’s own case against Coinbase, which alleged the exchange had been operating without proper registration as a broker, national securities exchange, or clearing agency since 2019, was dropped in February 2025. This development has shifted the momentum in Coinbase’s favor, potentially influencing the decisions of other states still pursuing enforcement actions.
Coinbase’s Staking Program Resumes
Following South Carolina’s decision, staking services have been reinstated for residents in the state. Coinbase users can now access staking rewards through all platforms, including the Coinbase app and website.
Coinbase’s Expansion Efforts
While resolving legal challenges in the U.S., Coinbase continues to prioritize global growth. The exchange has recently hinted at the potential acquisition of Deribit, a prominent crypto trading platform. Additionally, Coinbase is preparing to re-enter the Indian market after securing approval from the country’s Financial Intelligence Unit.
As the cryptocurrency landscape evolves, legal and regulatory clarity remains critical for exchanges like Coinbase to offer innovative services while maintaining compliance. Investors and crypto enthusiasts can expect further updates as these developments unfold.
