It has not been working since first release, and still not working now.
Its very frustrating, and misleading to be able to set the state field optional in WHMCS > System Settings > General Settings > Other > Optional Client Profile Fields, but the clientarea details pages and order pages still enforce the field as required for most countries.
The only solution we found was to hardcode edit the inclusion of StatesDropdown.js in the /templates/twenty-one/clientareadetails.tpl file to the following (I suggest making your own Child Theme, to keep changes after WHMCS updates):
<script type="text/javascript" src="{$BASE_PATH_JS}/StatesDropdown2.js"></script>
And then copy the /assets/js/StatesDropdown.js file to StatesDropdown2.js and add our own country code "states":
states['DK'] = ["","Hovedstaden","Sjælland","Nordjylland","Midtjylland","Syddanmark","end"];
Leaving the first option empty, for clients not wishing to bloat their invoice details with this unwanted state field.
Please give some love for this feature request Allow State/Region Overrides