Illinois Drops Coinbase Lawsuit, Joins Trend of Easing Crypto Staking Regulations

Illinois has decided to drop its lawsuit against Coinbase over the exchange’s staking program, following a similar move by three other U.S. states. This decision marks a significant shift in the regulatory approach towards cryptocurrency staking services. A spokesperson for Illinois Secretary of State Alexi Giannoulias confirmed the decision on April 3, 2025, although the exact timing of the case dismissal was not specified.

Illinois was one of ten states that initially sued Coinbase in 2023, alleging that the exchange had violated securities laws by offering staking services without proper registration. The lawsuit was part of a broader crackdown led by a multistate task force, which included regulators from Alabama, California, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington, and Wisconsin.

The legal battle over staking arose from concerns that Coinbase’s program, which allows users to earn rewards by locking up their crypto, operated without regulatory oversight. Regulators argued that Coinbase’s staking rewards program functioned as an unregistered securities offering, allowing the company to collect a share of staking profits before distributing the remainder to investors. The U.S. Securities and Exchange Commission (SEC) also sued Coinbase over its staking product, arguing it constituted an unregistered securities offering. However, the SEC dropped its case in February 2025.

Following the SEC’s decision, Kentucky, Vermont, and South Carolina have all moved to dismiss their lawsuits against Coinbase. Despite these developments, not all states have backed down. A representative for the New Jersey Bureau of Securities confirmed that its case against Coinbase remains open, while Washington State’s securities administrator, Bill Beatty, said its case is still ongoing.

The original lawsuit against Coinbase raised concerns that staking rewards accounts were not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), leaving investors unprotected from potential losses. Regulators in Alabama had initially ordered Coinbase to justify why it should not be forced to stop offering its staking services.

Despite the legal challenges, Coinbase has maintained that its staking services do not constitute securities and has continued to oppose regulatory claims. With Illinois now set to drop its case, the pressure on Coinbase’s staking program appears to be easing, though ongoing cases in states like Washington and New Jersey suggest the legal battle is not yet over.

Kentucky’s Department of Financial Institutions filed the joint dismissal with Coinbase on April 1, 2025, ending the legal battle nearly a year after joining 10 other state regulators in accusing the exchange of violating securities laws. Coinbase’s chief legal officer, Paul Grewal, acknowledged the decision and urged Congress to replace the current “state-by-state” legal battles with clear federal regulations.

Seven states, including Alabama, California, Maryland, New Jersey, Washington, and Wisconsin, are still pursuing cases against Coinbase. Meanwhile, Illinois has shifted its focus to Bitcoin adoption. The state is advancing a Bitcoin strategic reserve bill (HB1844), which proposes creating a dedicated fund to hold Bitcoin as a financial asset for at least five years. Representative John Cabello introduced the bill, which follows Arizona’s push to allow public funds and pensions to invest in Bitcoin.

As regulatory battles continue, Illinois’ pivot signals growing state-level interest in Bitcoin as a treasury asset. This shift in regulatory strategy suggests a broader trend toward unified oversight, promoting aligned rules that better manage digital asset risks while enhancing market clarity overall. The easing of legal pressures could increase investor trust in crypto services, with fewer state disputes leading to steadier offerings and a clearer compliance framework that reassures market participants.

This change could lead to more consistent legal frameworks that support market innovation and consumer safeguards statewide. The move away from state-specific crypto lawsuits indicates a trend toward unified oversight, which could foster a more unified national crypto framework.