In a significant legal development, a federal judge has ruled against Coinbase’s attempt to avoid being labeled as a “statutory seller” under U.S. federal law.
This decision means the prominent cryptocurrency exchange will move forward to address a lawsuit filed by investors in New York.
Investment Claims Against Coinbase
According to a Reuters report, U.S. District Judge Paul Engelmayer concluded that Coinbase needs to tackle claims that it sold securities without the requisite broker-dealer registration.
Investors have specifically pointed fingers at the exchange for trading 79 cryptocurrencies considered to be securities, all while lacking the necessary regulatory approvals.
It’s worth noting that this class-action lawsuit was initially dismissed by the Southern District of New York in February 2023.
However, over a year later, the Circuit Court of Appeals opted to revive certain elements of the lawsuit, giving it new life.
Judge’s Ruling on Transactions
Judge Engelmayer’s comments indicated that the transactions executed on Coinbase occur directly between customers and the exchange, which places Coinbase in the role of a seller in this transaction scenario.
In response to the ruling, a Coinbase representative expressed to Cointelegraph that the platform does not engage in listing, offering, or selling securities.
They emphasized that this latest ruling is crucial, as it has effectively refined the discovery phase of the ongoing litigation, and they look forward to tackling the outstanding claims in district court.
Ongoing Legal Conflicts
Coinbase’s legal troubles don’t stop there.
The exchange has been in conflict with the U.S. Securities and Exchange Commission (SEC) since June 2023, when the SEC accused Coinbase of operating an unregistered securities trading platform and failing to register as a broker.
Earlier this January, Coinbase appealed to a U.S. court in hopes of establishing that cryptocurrency transactions should be classified as non-security trades.
The company argues that the trades made on its platform should be seen as sales of digital assets instead of securities.
Moreover, Coinbase has also taken legal action against the SEC and the Federal Deposit Insurance Corporation (FDIC).
The exchange claims these agencies are working to restrict digital asset firms’ access to essential banking services and have not fulfilled requests made under the Freedom of Information Act.
As the largest cryptocurrency exchange in the United States by trading volume and the main custodian for spot Bitcoin exchange-traded funds, Coinbase plays a pivotal role in the U.S. cryptocurrency landscape.
Source: Cointelegraph
