Coinbase Must Face Class Action Lawsuit Over Securities Law Violations After Judge Rules It May Be a ‘Seller’

According to a Reuters report, on February 7, U.S. District Judge Paul Engelmayer dismissed Coinbase’s argument that it does not qualify as a statutory seller under federal securities laws. 

The crypto exchange had also argued that it never held or transferred ownership of the 79 tokens at the centre of the lawsuit, which include cryptocurrencies like Solana, Polygon, and Algorand. However, the judge pointed to the claim that customers transact exclusively with Coinbase, which could classify the exchange as a seller under securities law.

The case dates back to February 2023, when Judge Engelmayer initially dismissed the lawsuit. However, in April 2024, the 2nd U.S. Circuit Court of Appeals revived parts of the case, allowing certain claims to proceed.

Coinbase is also battling multiple lawsuits over similar allegations. In May 2024, a group of customers from California and Florida sued the exchange and CEO Brian Armstrong for violating securities law. Before that, the U.S. Securities and Exchange Commission (SEC) sued Coinbase in June 2023, accusing it of operating as an unregistered securities platform.

Despite these legal battles, Coinbase maintains that it does not sell securities, arguing that secondary crypto transactions do not qualify as securities trading. In response to the latest ruling, the company told Reuters, “We do not list, offer, or sell securities,” and confirmed its intent to challenge the lawsuit in court.

In a small legal victory, a federal court led by Judge Catherine Polk Failla recently granted Coinbase’s request for an interlocutory appeal, allowing it to challenge parts of the SEC lawsuit before trial.

If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”