Coinbase, a prominent cryptocurrency exchange, and its CEO, Brian Armstrong, face a class-action lawsuit. The legal challenge alleges that Coinbase, despite acknowledging in its user agreement that it operates as a securities broker, has been offering digital assets such as SOL, MATIC, NEAR, MANA, ALGO, UNI, XTZ, and XLM, which the lawsuit claims are unregistered securities.
The lawsuit, filed by Scott+Scott, represents several plaintiffs who argue that Coinbase’s sale of these digital assets violates state securities laws. The plaintiffs seek various remedies, including rescission, statutory damages under state law, and injunctive relief through a jury trial.
This legal action echoes previous litigation against Coinbase, where the central issue concerns whether certain digital assets sold on the platform qualify as securities. The plaintiffs assert that Coinbase’s user agreement explicitly states it is a “Securities Broker,” which implies that the digital assets sold should be considered investment contracts or other types of securities.
The case also targets Coinbase’s prime brokerage services, suggesting they operate as a securities broker/dealer. The plaintiffs have cited several digital assets, including Algorand (ALGO), Decentraland (MANA), Polygon (MATIC), Near Protocol (NEAR), Uniswap (UNI), Solana (SOL), Stellar Lumens (XLM), and Tezos (XTZ), as examples of securities offered by Coinbase.
Coinbase Faces Securities Lawsuit
Coinbase has previously contended that secondary sales of crypto assets do not meet the criteria for securities transactions, challenging the applicability of securities regulations to their operations. However, this new lawsuit brings renewed scrutiny to the classification of digital assets and the legal responsibilities of cryptocurrency exchanges.
The outcome of this lawsuit could have significant implications for the cryptocurrency industry, particularly concerning the regulatory treatment of digital assets and the definition of what constitutes a security. As the legal proceedings unfold, the cryptocurrency community will closely monitor the developments, which may set a precedent for regulating and selling digital assets.
This case is separate from Coinbase’s ongoing legal dispute with the SEC, which also questions the classification of tokens sold on the platform as securities. Coinbase recently filed an interlocutory appeal in response to a judge’s decision allowing the case to proceed, indicating cryptocurrency regulation’s complexity and evolving nature.
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