Coinbase Class Action Lawsuit Related To Unregistered Securities Trading Partially Revived

Zinger Key Points
  • The U.S. appeals court has partially reversed a decision, changing course for a 2021 customer lawsuit against Coinbase.
  • In February 2023, Coinbase won a motion to dismiss the proposed class action lawsuit.

Coinbase COIN finds itself back in the legal spotlight as a class action lawsuit against the company has been partially revived by a U.S. appeals court, overturning a previous dismissal.

What Happened: The lawsuit, initially dismissed in February 2023, alleged that Coinbase facilitated the trading of unregistered securities, as reported by Blockworks.

U.S. District Judge Paul Engelmayer initially ruled in favor of Coinbase, stating that the company did not claim ownership of the 79 tokens under scrutiny, thus not being the actual seller.

However, the appeals court upheld Engelmayer’s decision that the plaintiffs could not rescind transactions due to insufficient evidence of a contract permitting transaction cancellation.

Reacting to the Second Circuit’s decision, Coinbase’s Chief Legal Officer Paul Grewal said on April 5, “We appreciate the Second Circuit confirming today what is clear under the federal securities law: there's no private liability for the secondary trading of digital assets on exchanges like Coinbase. Why? Because contracts matter.”

The appeals panel has now returned the case to the district court for further ruling on the agreement used and its relevant version.

Benzinga future of digital assets conference

Also Read: Coinbase Legal Setback: Court Rejects Motion To Dismiss SEC’s Securities Allegations

Why It Matters: This decision and the partial revival of the lawsuit have reignited discussions about the necessity of physical contracts for an asset to be considered a security. This question has been central to several legal disputes between cryptocurrency exchanges and the SEC in recent years.

The outcome of this case could potentially influence future rulings and regulatory decisions in the rapidly evolving digital assets space.

What’s Next: The influence of Bitcoin as an institutional asset class is expected to be thoroughly explored at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Read Next: Why Coinbase Stock Is Climbing Higher

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