California Crypto Startup Moves to South Dakota as Debate Over Proposed Wealth Tax Heats Up

California-based cryptocurrency infrastructure company BitGo has relocated its headquarters to South Dakota in the run-up to its initial public offering. The move comes amid a growing backlash against a proposed California billionaire tax, which would impose a one-time 5% levy on residents with a net worth exceeding $1 billion according to Forbes analysis. The company now operates from Sioux Falls, South Dakota, while maintaining offices in multiple global locations.

BitGo's relocation is part of a broader trend of businesses shifting out of California due to regulatory and tax pressures. This includes high-profile companies like Oracle and X, which have also moved their headquarters. The shift highlights the challenges that the proposed wealth tax faces in retaining top-tier businesses within the state.

The 2026 Billionaire Tax Act has sparked significant debate among lawmakers, business leaders, and financial experts. Critics argue that the tax could drive away California's wealthiest residents, reducing future tax revenues and harming the state's economy as reported by Bloomberg. The proposed measure aims to raise $100 billion for healthcare and education programs but raises legal questions, including issues related to the Dormant Commerce Clause and the Uniformity Clause of the California Constitution according to Forbes.

Why Did This Happen?

The decision to relocate reflects broader concerns about the implications of the proposed wealth tax. BitGo CEO Mike Belshe expressed strong reservations about the impact of the tax, stating that it could deter entrepreneurs from starting businesses in California as cited by Yahoo Finance. This sentiment is echoed by other startup leaders, who warn that the tax could discourage venture capital investment and innovation according to Bloomberg.

Supporters of the tax argue that it is necessary to fund critical state services, particularly in light of federal budget cuts. A similar tax in Massachusetts has already raised significant revenue, suggesting that such measures could be effective in other states as reported by Bloomberg. However, California Governor Gavin Newsom has criticized the proposal, calling it poorly drafted and unlikely to achieve its intended goals according to Forbes.

How Did Markets React?

The market has shown mixed responses to the proposed tax and related corporate relocations. While the California billionaire tax has not yet passed, it has already influenced business decisions and investor sentiment according to Forbes. The potential for legal challenges to the tax has further added uncertainty to the market. In addition, the Supreme Court's recent decision to green-light Texas's redistricting map signals a shift in the political landscape, with implications for how states manage electoral and fiscal policies according to Investing.com.

In the cryptocurrency space, BitGo's move has raised questions about the future of the industry in California. The company's decision to base its IPO in South Dakota—where it now occupies 5,250 square feet of office space—may influence other crypto firms considering their options as reported by Yahoo Finance. South Dakota's regulatory environment is seen as more favorable to technology and finance startups, offering a potential alternative to California's increasingly stringent tax policies.

What Are Analysts Watching Next?

Analysts are closely monitoring how the proposed wealth tax will affect California's economy and innovation ecosystem. The state's tech industry is a significant contributor to its GDP, and any substantial shift in business activity could have long-term consequences according to Bloomberg.

Beyond California, similar tax proposals are gaining traction in other states. Rhode Island Governor Dan McKee recently supported a plan to increase taxes on millionaires to offset federal budget cuts as reported by Bloomberg. These developments suggest a growing trend toward using wealth taxation to address economic disparities and fund public services.

Investors are also watching the outcome of legal challenges to the proposed California tax. If the measure is found to violate constitutional provisions, it could deter other states from implementing similar initiatives according to Forbes. In the meantime, the continued movement of businesses out of California underscores the importance of regulatory environments in shaping investment decisions.

The debate over wealth taxes is not limited to the U.S. Internationally, crypto and fintech companies are exploring new markets and regulatory frameworks that offer more favorable conditions for growth according to Forbes. This trend is particularly relevant in emerging markets, where demand for digital financial services is growing rapidly as reported by Forbes.

As the November 2026 election approaches, the outcome of the proposed California billionaire tax will be a key factor in shaping the state's political and economic landscape. Businesses, investors, and policymakers will be watching closely to see whether the measure gains enough support to pass—and what consequences that might bring.