GoldenOcelot's page

Hi there! Just in case anyone sees this floating around (like myself seeing as this is the top google listing for spellcasting while grappled), the updated rules on grappling will help clear the question up.

Grapple
As a standard action, you can attempt to grapple a foe, hindering his combat options. If you do not have Improved Grapple, grab, or a similar ability, attempting to grapple a foe provokes an attack of opportunity from the target of your maneuver. Humanoid creatures without two free hands attempting to grapple a foe take a –4 penalty on the combat maneuver roll. If successful, both you and the target gain the grappled condition. If you successfully grapple a creature that is not adjacent to you, move that creature to an adjacent open space (if no space is available, your grapple fails). Although both creatures have the grappled condition, you can, as the creature that initiated the grapple, release the grapple as a free action, removing the condition from both you and the target. If you do not release the grapple, you must continue to make a check each round, as a standard action, to maintain the hold. If your target does not break the grapple, you get a +5 circumstance bonus on grapple checks made against the same target in subsequent rounds. Once you are grappling an opponent, a successful check allows you to continue grappling the foe, and also allows you to perform one of the following actions (as part of the standard action spent to maintain the grapple).

and

If You Are Grappled

If you are grappled, you can attempt to break the grapple as a standard action by making a combat maneuver check (DC equal to your opponent's CMD; this does not provoke an attack of opportunity) or Escape Artist check (with a DC equal to your opponent's CMD). If you succeed, you break the grapple and can act normally. Alternatively, if you succeed, you can become the grappler, grappling the other creature (meaning that the other creature cannot freely release the grapple without making a combat maneuver check, while you can). Instead of attempting to break or reverse the grapple, you can take any action that doesn’t require two hands to perform, such as cast a spell or make an attack or full attack with a light or one-handed weapon against any creature within your reach, including the creature that is grappling you. See the grappled condition for additional details. If you are pinned, your actions are very limited. See the pinned condition in Conditions for additional details.

Once the grapple is successful, you are both grappled, but only the initiator can freely break the grapple. This removes the distinction of grappling/grappler as now "Grappled" is a condition.

One free hand lets you access Material Components per normal spellcasting rules. Only the old "grappling" and pinned side notes list Somatic as being restricted, but the most recent update involving it (that I can find) states:

Grappled or Pinned

Casting a spell while you have the grappled or pinned condition is difficult and requires a concentration check (DC 10 + the grappler’s CMB + the level of the spell you’re casting). Pinned creatures can only cast spells that do not have somatic components.

Sadly, while this has been Errata'd in, the old sections involving "Grappling or Pinned" haven't been removed, and still list somatic as out for both. However, since the newer text contradicts the older (by omission), it's safe to say to go with the newer text regardless.

As always, Your DM has final say, and let's face it, grappling sucks, even if it has gotten much easier since 3.5.