Cryptocurrency exchange Coinbase is again facing legal action after a class action lawsuit that was previously dismissed was partially reinstated. A U.S. District Court judge in New York has ruled that the case, which accuses the platform of selling unregistered securities, must proceed. Originally filed in March 2022, the lawsuit claims that 79 digital tokens listed on Coinbase qualify as securities, requiring proper registration.
The lawsuit reopened after the dismissal
The case was initially dismissed in February 2023 by U.S. District Judge Paul Engelmayer, who ruled against the plaintiffs’ securities law arguments. However, an appeals court later determined that the dismissal was based on an invalid user agreement. While the appellate court upheld the dismissal of claims directly related to securities, it sent the case back for further review.
The plaintiffs, three Coinbase users, argue that the exchange functioned as an unregistered securities trading platform. They are seeking damages and insist that Coinbase should have registered as a national securities exchange.
Judge rejects coinbase’s defense
Coinbase attempted to remove the reinstated case, arguing that it did not act as a “statutory seller” under federal law. The company claimed that its system only matched buyers and sellers without directly selling tokens. Judge Engelmayer disagreed, stating that all transactions on the platform occur between users and Coinbase itself.
In response, Coinbase maintained that it does not list or sell securities, emphasizing its commitment to defending itself in court. The company has consistently argued that digital assets on its platform do not meet the legal definition of securities.
Separate SEC lawsuit against coinbase
In addition to the class action suit, Coinbase is also facing legal action from the U.S. Securities and Exchange Commission. The SEC sued the exchange in June 2023, accusing it of operating as an unregistered national securities exchange, broker, and clearing agency.
A key issue in that case is whether an investment contract requires an actual contract. The SEC claims that an agreement is unnecessary, a point that Coinbase is challenging in court. The exchange was granted an interlocutory appeal in January, allowing it to argue for the case’s dismissal before an appellate court.