- A class action lawsuit against Coinbase has been dismissed
- The case claimed that customers had unwittingly been sold securities
- The judge disagreed, saying that Coinbase wasn’t responsible
A class action against Coinbase which accused the exchange of selling securities without proper registration has been dismissed. The suit, brought in March last year, listed 79 tokens that the plaintiffs claimed were securities that Coinbase was selling in violation of state and federal laws, and that buyers were not warned of the risks involved in their purchases. However, Judge Engelmayer ruled that the claimants were incorrect in their belief that Coinbase was the “actual seller” of the tokens and also decided that Coinbase wasn’t soliciting sales under a strict legal definition.
79 Coins Were Securities, Plaintiffs Argued
The case was brought by Christopher Underwood, Louis Oberlander, and Henry Rodriguez representing a class of Coinbase customers, with Coinbase Global, Coinbase, and the company’s CEO Brian Armstrong named as defendants. It argued that each of the 79 coins listed qualified as a security under the Howey test as “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
Judge Engelmayer didn’t rule on this aspect, accepting for the sake of the case that this was true (or he might have just spoken to Gary Gensler). However, he most certainly did rule on the claims of Coinbase’s ownership, saying that plaintiffs’ understanding of ownership was flawed:
The (Coinbase) User Agreement’s terms flatly contradict the AC’s allegations that Coinbase holds title to the digital assets […] plaintiffs have not pled that Coinbase either qualified as the user’s “immediate seller”
Judge Engelmayer also ruled on the claim that Coinbase facilitated the sale of securities through its website, stating:
…allegations regarding Coinbase’s “solicitation” of the transactions involving the Tokens fail […] even had the AC pled direct solicitation by Coinbase, it does not plead that plaintiffs purchased and sold the Tokens as a result of such solicitation, as also required.
Coinbase Facing Barrage of Legal Action
The lawsuit included claims at the national and state level (California, Florida, and New Jersey), with the national claims dismissed with prejudice, meaning they cannot be retried, while the state claims were not, due to the court lacking sufficient resources to address them.
Coinbase is still facing other numerous lawsuits, including lawsuits from customers, a potential lawsuit over the sale of securities by the Securities and Exchange Commission, and Craig Wright’s lawsuit over its handling of the BSV listing.