Your dormant crypto could be claimed by the state, and sold

A growing legal risk most crypto holders are not aware of

A quiet but significant legal shift is underway across the United States. According to an analysis by law firm Eversheds Sutherland, more than two dozen states now apply unclaimed property laws to cryptocurrency. The rules vary by state, but the core mechanism is the same: leave a custodial account inactive for a defined period, typically around three years, and a state treasury can classify it as abandoned and take custody of the assets.

California moved to address this directly in late 2025, when Governor Gavin Newsom signed legislation formally subjecting digital financial assets to the state's Unclaimed Property Law. Under the rules, digital financial assets are considered unclaimed after three years of account inactivity following failed contact attempts by the company holding the assets. Companies holding digital financial assets must notify apparent owners between six and 12 months before reporting assets as unclaimed to the state Controller.

The liquidation question is where it gets contentious. Most states immediately liquidate the crypto and hold fiat, meaning owners who later reclaim their property receive the dollars at whatever price the state sold it for. If the state cashed out at a market low, the original holder absorbs that loss with no exposure to any subsequent rebound.

State approaches differ, and lawsuits are following

Not every state handles abandoned crypto the same way. Virginia, for example, presumes cryptocurrency abandoned after five years of inactivity and requires assets to be transferred in-kind, meaning the state takes possession of the actual tokens rather than converting them to cash upon receipt. In many other cases, states have liquidated digital assets soon after taking custody, leaving owners who later reclaim funds with only the cash value at the time of sale.

California has since gone further. Governor Newsom signed a follow-on bill into law that prevents unclaimed crypto assets from being automatically liquidated, requiring that dormant crypto turned over to the state be held as crypto, not automatically converted to cash.

One practical detail that catches many holders off-guard: these laws do not apply to self-custodied wallets or cold storage solutions. The rules target custodial platforms such as centralised exchanges, where a third party holds the private keys. Many crypto investors follow a long-term hold strategy without frequent interaction, but prolonged silence may be interpreted by the state as abandonment. Litigation over how these rules are applied is already emerging, and the legal landscape is likely to keep shifting as more states formalise their positions on digital asset escheatment.

Pivotal litigation, targeted legislation, and aggressive regulatory interpretations are reshaping the unclaimed property landscape for US companies. For individual holders, the practical takeaway is straightforward: log in, respond to dormancy notices from your exchange, and understand where your assets are held.

Sources:
Thomson Reuters: California Subjects Digital Financial Assets to Unclaimed Property Law
Bitcoin Magazine: Virginia Enacts Law Requiring State To Hold Unclaimed Crypto
JDSupra: Unclaimed Property Hot Topics (Eversheds Sutherland)