Coinbase unregistered securities lawsuit gets dismissed in court


  • Coinbase was acquitted of a consumer class action complaint alleging that it sold unregistered securities on its platform.
  • The price of the company’s stock increased by more than 20% nearly immediately following the decision.

A consumer class action lawsuit against the United States’ largest crypto entity Coinbase, which alleged that the cryptocurrency exchange enabled the sale of unregistered securities on its platform, was dismissed by a judge on Feb. 1.

Because the platform is not registered with the US Securities and Exchange Commission, the consumers allege that they were sold or solicited 79 digital assets in violation of US law.

The proposed class-action suit was filed in federal court in New York in October 2021 to collect damages stemming from these transactions.

Why the Coinbase case was dismissed

Even while US District Judge Paul A. Engelmayer stated that he believed the digital tokens were securities for the purposes of Coinbase’s request to dismiss the case, the judge did not reach a decision regarding whether or not the digital tokens were indeed securities.

According to him, if the lawsuit had been allowed to continue, the question of whether or not the assets in question constitute securities would have been the primary point of contention.

Engelmayer said the assertions made in the lawsuit that the company owns title to the digital assets that are purchased and sold on the exchange are directly contradicted by the terms of the user agreement that Coinbase has in place.

In addition, the judge came to the conclusion that the platform did not aggressively seek investment opportunities.

As stated in the lawsuit, Coinbase participated in promotions, provided users with news updates about fluctuations in cryptocurrency prices, and linked to online articles in order to promote the sale of the tokens.

Additionally, the company is accused of providing users with descriptions of the tokens and their alleged value. However, according to Engelmayer, these activities are consistent with the marketing efforts, information, and services that courts have ruled do not constitute an active solicitation.

In April of last year, a ruling by a judge in the same court rendered a lawsuit against Binance -the world’s largest and most prominent crypto platform- to be unsuccessful.

The claims had been brought forth too late and thus were not able to be heard, in addition to the fact that United States securities laws weren’t applicable in the case.

Despite being a relatively large presence in the US, with much of its infrastructure and operations based within the country, Binance is still considered an international exchange that does not fall under domestic jurisdiction.

Coinbase shares see a surge

Following yesterday’s news that a federal court had dismissed the class-action complaint against Coinbase, the company’s stock price jumped significantly today. The stock price rose by over 20% between the previous day’s close and today’s midday.

The crypto business has begun to rebound from the FTX exchange’s collapse, and the company’s price has risen by more than 100% this year.

Since the majority of Coinbase’s income comes from its trading activities, the cryptocurrency’s (BTC) price this year has been significantly correlated with that of Coinbase’s shares.

According to a note published by the British financial institution Barclays on Thursday, Coinbase trading volumes increased by 56% in January compared to the previous month.

These volumes are now comparable to those seen in October, before the collapse of FTX, but are still lower than the average for 2022.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

Share link:

Jai Hamid

Jai Hamid is a passionate writer with a keen interest in blockchain technology, the global economy, and literature. She dedicates most of her time to exploring the transformative potential of crypto and the dynamics of worldwide economic trends.

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Related News

So what, is Coinbase scamming its customers now?
Subscribe to CryptoPolitan