Coinbase Exchange ‘Survives’ Class Action Lawsuit

Lavina Daryanani
Source: Twitter

A class action lawsuit was filed by customers against cryptocurrency exchange Coinbase in New York’s federal court in October 2021. They sought damages from the sale of 79 digital assets. Consumers contended that their sales equated to illegal contracts because they were unregistered securities. They also alleged that the platform was not registered as a broker-dealer with the Securities and Exchange Commission.

A recent Reuters report revealed that the crypto exchange not only managed to survive the lawsuit, but also scored multiple goals to win it.

What did the judge say?

On Wednesday, U.S. District Judge Paul Engelmayer dismissed the class action lawsuit. He ruled that customers who transacted on Coinbase and Coinbase Pro trading platforms failed to prove that the company sold or held the title of the 79 tokens that they traded.

Customers contended that other platforms usually matched buyers and sellers. However, Coinbase acted as an “intermediary.” Doing so made it the “actual seller” of the tokens, they claimed. The plaintiffs also added that the system in place empowered Coinbase to collect transaction fees while evading disclosure rules.

The judge ruled that the terms of the exchange’s user agreement “flatly contradict” allegations in the lawsuit. The judge also found that the platform did not actively ask for investments. Engelmayer further cleared that Coinbase did not have any direct role in the transactions, even though it allegedly advocated tokens by describing their “purported value proposition” and took part in “airdrops” to refine trading volume.

In his ruling, the judge wrote,

“These activities of an exchange are of a piece with the marketing efforts, materials and services that courts … have held insufficient” to qualify defendants as sellers.

Coinbase’s stock price inclined by 12.35% during the trading hours on Wednesday and rose to $65.70. It registered another 3.41% gain during the after-trading hours. Alongside this win, Fed Chair Jerome’s comments and the macro bullishness rubbed off positively on COIN’s price.

Source: Google Finance

Also Read: Ark Invest Buys Coinbase Shares Worth $1.45M: COIN Up 22%