In a significant development for the cryptocurrency industry, a U.S. federal judge has ruled that Coinbase must face a class action lawsuit in New York. This ruling could have widespread implications for digital asset exchanges.
A judge for the Southern District of New York, Paul Engelmayer, dismissed Coinbase’s argument that it was not a “statutory seller.” This claim was made in an effort to dismiss a lawsuit alleging that Coinbase illegally sold securities by offering unregistered digital assets to customers. Engelmayer found Coinbase’s defense unconvincing, explaining that Coinbase never passed title to the 79 crypto assets traded on the platform. He noted that, “customers on Coinbase transact solely with Coinbase itself.”
Coinbase strongly disagreed with the ruling. In a statement, the company said, “Coinbase does not list, offer, or sell securities on its exchange. We look forward to vindicating the remaining claims in the district court.”
Broader Legal Implications
The plaintiffs claimed that Coinbase was the direct seller of these cryptocurrency assets, and the judge agreed, rejecting the attempt to dismiss claims under Florida, New Jersey, and California laws. Because it permits the action to proceed with claims involving many states, this decision is noteworthy.
This lawsuit is only one of Coinbase’s ongoing legal disputes. The corporation was sued by the U.S. Securities and Exchange Commission (SEC) in 2023 for allegedly operating as an unlicensed broker-dealer and breaking securities laws. Coinbase, however, retaliated by bringing a lawsuit against the Federal Deposit Insurance Corporation (FDIC) and the SEC. These agencies were actively trying to “cripple the digital asset industry,” according to the corporation.
In its statement, Coinbase emphasized, “The SEC has waged a scorched-earth enforcement war on digital-asset firms that, in conjunction with efforts by other financial regulators to de-bank crypto firms, is designed to cripple the digital asset industry.”
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