Good news of the sort that one hopes technological advances will make inevitable, out of the tech-industry-heavy state of California: Bitcoin (and other alternative currencies) are recognized by the state of California as existing and being legal to use.
As the language from bill A.B. 129 reads:
This bill makes clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, or other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments. Modern methods of payment have expanded beyond the typical cash or credit card transactions. Bitcoin, a digital currency (Also called cryptocurrency), has gained massive media attention recently as the number of businesses has expanded to accept Bitcoins for payment....
That bill was signed into law by Gov. Jerry Brown over the weekend, as reported by Reuters. From their report:
Democratic Assemblyman Roger Dickinson, the bill's author, said earlier this week the bill reflects the popularity of forms of payment already in use in California like bitcoin and that even rewards points from businesses, such as Starbucks Stars, could technically be considered illegal without an update to currency law in the nation's most populous state.
Bonus Bitcoiniana: an attempt to analyze how the markets reacted to the Feds dumping 30,000 or so of their confiscated 'coin on the market last week.