South Carolina Drops Lawsuit Against Coinbase, Embraces Crypto with New Legislation

Is South Carolina paving the way for a crypto-friendly future? The state’s recent actions suggest so, as it has not only dropped its lawsuit against Coinbase but also introduced a bold new bill to invest in Bitcoin.

• South Carolina dismisses lawsuit against Coinbase over staking services.
• State introduces bill to invest in cryptocurrencies, primarily Bitcoin.
• Coinbase’s Chief Legal Officer celebrates the decision as a win for crypto users.

On March 27, 2025, South Carolina made headlines by dismissing its lawsuit against Coinbase, a major cryptocurrency exchange, over its staking services. Staking services involve holding cryptocurrencies to support a blockchain network’s operations, earning rewards in return. The lawsuit, originally filed on June 6, 2023, accused Coinbase of offering unregistered securities through these services. This dismissal follows a similar action by Vermont and comes amidst ongoing legal challenges from other states.

The dismissal was agreed upon through a mutual agreement between Coinbase and the South Carolina Attorney General’s securities division. This move marks a significant moment in the ongoing debate about cryptocurrency regulation, especially since it coincides with the dismissal of a federal lawsuit by the SEC against Coinbase in February 2025.

Paul Grewal, Coinbase’s Chief Legal Officer, celebrated the decision, stating,

“South Carolina just joined Vermont to dismiss its unfounded staking lawsuit against Coinbase.”

He emphasized that the dismissal was a victory for both Coinbase and American crypto users, noting,

“The 52 million Americans who own crypto deserve commonsense consumer protections and clear rules.”

Grewal also highlighted the impact of the lawsuit on South Carolina residents, claiming it led to an estimated $2 million in lost staking rewards.

Despite this positive development for Coinbase, eight other states—Alabama, California, Illinois, Kentucky, Maryland, New Jersey, Washington, and Wisconsin—have yet to dismiss their lawsuits against the exchange. This ongoing legal battle underscores the complexities and uncertainties surrounding the classification of staking services as securities.

On the same day as the lawsuit dismissal, South Carolina introduced the “Strategic Digital Assets Reserve Act”, a bill filed by Rep. Jordan Pace. This legislation proposes to allocate up to 10% of certain state funds into cryptocurrencies, primarily Bitcoin. Under the act, State Treasurer Curtis Loftis would be authorized to hold up to one million BTC in a reserve and invest in Bitcoin across various state-managed funds. This move reflects a progressive stance on digital assets and aligns with broader trends of states exploring ways to integrate cryptocurrencies into their financial systems.

The introduction of the Strategic Digital Assets Reserve Act is particularly noteworthy as it signals a shift from legal scrutiny to embracing the potential of cryptocurrencies. By focusing on Bitcoin, the state is positioning itself at the forefront of this financial revolution, recognizing the decentralized nature and potential of digital assets. The bill also includes detailed provisions for secure storage and management of these digital assets, demonstrating a commitment to responsible investment practices.

However, it’s important to remain cautiously optimistic. While the dismissal of the lawsuit and the introduction of the new bill are positive steps, the crypto space is fraught with challenges. Regulatory clarity remains elusive, and the classification of staking services as securities continues to be a contentious issue. Moreover, the allocation of state funds into cryptocurrencies carries inherent risks, given the volatility and speculative nature of these assets.

Despite these challenges, the move by South Carolina is a testament to the growing acceptance and understanding of cryptocurrencies. It’s a reminder that while Bitcoin and other digital assets have the potential to disrupt the status quo and promote decentralization, they also require responsible management and clear regulatory frameworks to thrive. It looks like South Carolina decided to stop suing Coinbase and start a love affair with Bitcoin instead.

As we navigate this evolving landscape, it’s crucial to maintain a balanced perspective. The dismissal of the lawsuit against Coinbase and the introduction of the Strategic Digital Assets Reserve Act are significant developments, but they are just pieces of a larger puzzle. The crypto community must continue to advocate for clear rules and consumer protections while embracing the innovative potential of these technologies.

Regulators need to get their act together and stop treating Bitcoin like a hot potato they can’t handle. The potential economic impact of investing state funds in Bitcoin is both exciting and risky. On one hand, it could set a precedent for other states to follow, potentially driving mainstream adoption. On the other hand, Bitcoin’s volatility could pose significant financial risks. According to recent studies, Bitcoin’s historical volatility has been as high as 70%, which is far greater than traditional investments like stocks or bonds.

It’s also worth considering the broader national context. President Trump’s recent executive order to create a Strategic Bitcoin Reserve indicates a growing interest at the federal level in leveraging cryptocurrencies. This move by South Carolina could be seen as a state-level echo of these federal initiatives, pushing the boundaries of what’s possible with digital assets.

Yet, not everyone is on board with this crypto enthusiasm. There’s potential opposition from within the state, with concerns about the speculative nature of cryptocurrencies and the need for more robust regulatory frameworks. Critics argue that investing state funds in Bitcoin is akin to gambling with taxpayer money, highlighting the need for a more cautious approach.

Key Takeaways and Questions

• What was the outcome of South Carolina’s lawsuit against Coinbase?

  South Carolina dropped its lawsuit against Coinbase over its staking services on March 27, 2025.

• How did Coinbase’s Chief Legal Officer react to the lawsuit dismissal?

  Paul Grewal celebrated the decision, calling it a victory for Coinbase and American crypto users, and expressed hope that other states would follow suit.

• What is the Strategic Digital Assets Reserve Act?

  It is a proposed bill in South Carolina that would allocate up to 10% of certain state funds into cryptocurrencies, primarily Bitcoin, and create a Strategic Digital Assets Reserve.

• Who is authorized to manage the proposed Bitcoin reserve under the new act?

  State Treasurer Curtis Loftis is authorized to manage the proposed Bitcoin reserve.

• How many other states have yet to dismiss their lawsuits against Coinbase?

  Eight other states have yet to dismiss their lawsuits against Coinbase: Alabama, California, Illinois, Kentucky, Maryland, New Jersey, Washington, and Wisconsin.

• What impact did the lawsuit have on South Carolina residents according to Paul Grewal?

  Paul Grewal claimed that the lawsuit led to an estimated $2 million in lost staking rewards for South Carolina residents.

As the journey towards mainstream adoption of cryptocurrencies continues, it’s clear that the path is filled with both promise and pitfalls. South Carolina’s actions are a bold step forward, but the road ahead requires careful navigation and a commitment to the principles of decentralization, privacy, and effective accelerationism.