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South Carolina Ends Legal Battle with Coinbase Over Staking Services

In a significant development for the cryptocurrency sector, South Carolina has officially dropped its lawsuit against the popular crypto exchange, Coinbase. This makes it the second state to abandon its legal claims related to staking services, following a notable shift in regulatory approaches by U.S. authorities. Paul Grewal, the Chief Legal Officer of Coinbase, heralded this outcome as a “victory” for crypto enthusiasts and investors.

Details of the Legal Dismissal

On Thursday, Paul Grewal announced that South Carolina had agreed to dismiss its case in a mutual agreement between the state’s Attorney General’s Securities Division and Coinbase. This decision marks a progressive trend, as South Carolina is now the second state to retract its staking-related legal action against the exchange.

The Broader Context

Earlier in June 2023, a coalition of ten U.S. state regulators, including Alabama, California, and others, accused Coinbase of breaching securities laws by offering staking rewards to residents without proper registration. The multi-state task force issued a Show Cause Order, which was subsequently followed by a lawsuit from the Securities and Exchange Commission (SEC) against Coinbase for alleged securities violations related to its staking services.

Shifts in Regulatory Landscape

Recently, Vermont also withdrew its staking services lawsuit, citing changes in SEC policies and the potential for new federal regulatory directives. In a court document dated March 13, Vermont stated that dismissing the pending Show Cause Order was in the best interest of justice, given the evolving regulatory environment.

Is the U.S. Becoming More Crypto-Friendly?

Paul Grewal expressed that South Carolina’s decision was a positive step for the 52 million American crypto investors who deserve clear regulations and consumer protections. Grewal hopes this will pave the way for other states still imposing restrictions on staking.

The U.S. crypto landscape is indeed becoming more welcoming under the current administration. The SEC, now led by acting chair Mark Uyeda, is actively working on a comprehensive regulatory framework. The commission has been open to public feedback as it navigates complex regulatory challenges.

Recent Developments in Crypto Regulation

In recent months, the SEC has either dismissed or paused several significant crypto lawsuits, including those involving Coinbase, Robinhood, and Binance. On Thursday, it officially dropped three cases and concluded one investigation, which included the closure of its inquiry into Crypto.com without any enforcement actions.

Prominent journalist and podcast host Eleanor Terrett reported that the SEC also dismissed litigation against Kraken, Consensys, and Cumberland. However, the Ripple case remains pending, as the SEC still needs to address procedural aspects before moving forward.