- Plaintiffs argue that Coinbase acted as an unregistered broker and sold risky tokens.
- A judge rejected Coinbase’s latest dismissal bid and pushed the case into discovery.
- Coinbase plans to let users decide on token legitimacy in a major listing overhaul.
Coinbase is facing renewed legal trouble after a federal judge denied its latest attempt to dismiss a class action lawsuit accusing the crypto exchange of selling unregistered securities.
The lawsuit, originally filed in 2021, alleges that Coinbase illegally offered and sold digital assets that should have been registered as securities under US law.
The plaintiffs claim Coinbase acted as an unregistered broker and failed to disclose the risks associated with these tokens.
The lawsuit alleges that Coinbase “stands between the buyer and seller in each trade on its platform, meaning that it is the actual seller of the unregistered securities that transact each day on its platform.”
The case was initially dismissed in 2023. The court ruled that the plaintiffs failed to sufficiently allege that Coinbase was a statutory seller.
However, in April 2024, the Second Circuit reinstated the claims, allowing investors to move forward with their lawsuit under federal and state securities laws.
On February 7, Judge Paul Engelmayer rejected Coinbase’s latest motion for judgment on the pleadings, signaling that the statutory seller question must be resolved through discovery.
Token listing overhaul
Coinbase has consistently denied wrongdoing, arguing that the tokens listed on its platform are not securities and that the lawsuit lacks merit.
At the same time, the company is planning a major overhaul of its token listing process.
Coinbase CEO Brian Armstrong recently suggested that the exchange may shift to a user-driven approach, where customers decide which tokens are scams and which have real potential.
It would eliminate Coinbase’s listing barriers and reduce its role as a gatekeeper.
It could also work in the exchange’s favor to weaken arguments that it is directly responsible for unregistered securities sales.
Crypto market movers
- Bitcoin has lost 1.2% in the past 24 hours and is trading at $95,970.
- Ethereum is down 4.5% over the same period to $2,615.
What we’re reading
- ‘Hawk Tuah girl’ Haliey Welch — and her lawyer — explain memecoin dumpster fire ― DL News
- Stablecoin Bills Could Squeeze Out $140 Billion Tether ― Unchained
- Is this the end of the ‘memecoin supercycle’? ― Milk Road
- BlackRock is rolling out a Bitcoin ETF in Europe. Here’s why it’s a hard sell ― DL News
Kyle Baird is DL News’ Weekend Editor. Got a tip? Email at kbaird@dlnews.com.
