Coinbase, a leading cryptocurrency exchange, has been cleared of legal trouble after U.S. District Judge Paul Engelmayer dismissed a customer lawsuit with prejudice. Legal action was brought against Coinbase Global Inc., Coinbase Inc., and its CEO, Brian Armstrong, in March 2022.
The lawsuit alleged that the exchange illegally offered for sale and sold 79 cryptocurrencies that were considered unregistered securities and failed to comply with the requirement of registering as a broker-dealer.
The plaintiffs were seeking compensation for damages resulting from the sale or promotion of the crypto tokens, which they believed to be unlawful due to Coinbase’s lack of registration with the U.S. Securities and Exchange Commission (SEC).
Coinbase stock is up 20% today because a judge dismissed a class action lawsuit
The lawsuit claimed that Coinbase sold unregistered securities
— Genevieve Roch-Decter, CFA (@GRDecter) February 2, 2023
Ruling in Favor of Coinbase
In a recent ruling, Judge Engelmayer stated that Coinbase had no direct involvement in the transactions of the crypto tokens traded on their platform, despite promoting their value proposition and participating in “airdrops.” The plaintiffs in the lawsuit against Coinbase have alleged that the company acted as a go-between, enabling it to charge transaction fees without following the requisite disclosure requirements for traditional securities designed to safeguard investors.
Regulatory Scrutiny in the Cryptocurrency Industry
Coinbase had previously revealed that they had received subpoenas from the SEC, with the regulator seeking information on the platform’s listing processes. This highlights the increasing scrutiny cryptocurrency exchanges face as regulators seek to understand and regulate the industry better.
Gary Gensler, the Chairman of the SEC in the United States, has declared that Bitcoin is considered a commodity but has emphasized that the majority of other cryptocurrencies are considered securities. Gensler has been advocating for crypto trading and lending platforms to register with the SEC as the regulator looks to better protect investors and bring greater transparency to the industry.