US Judge Dismisses Customer Lawsuit Against Crypto Exchange Coinbase

A U.S. district judge dismissed the customer lawsuit filed against Coinbase and its CEO Brian Armstrong. According to the lawsuit, Coinbase sold 79 cryptocurrency tokens that are unregistered securities.

Customer Lawsuit Against Coinbase Dismissed

Customers of cryptocurrency exchange Coinbase (Nasdaq: COIN) filed a planned class action lawsuit in Manhattan, but it was dismissed with prejudice on Wednesday by U.S. District Judge Paul Engelmayer, making it impossible to file it again, according to Reuters.

In March of last year, a lawsuit was brought against Coinbase Global Inc., Coinbase Inc., and CEO Brian Armstrong. The plaintiffs claimed that the cryptocurrency exchange had failed to register as a broker-dealer and had sold 79 crypto tokens that were unregistered securities. Because Coinbase is not registered with the U.S. Securities and Exchange Commission, the plaintiffs in the case say that selling or promoting cryptocurrency tokens is illegal and seek damages for those actions (SEC).

Contrary to other cryptocurrency trading platforms that solely connect buyers and sellers, the plaintiffs said that Coinbase served as a “intermediary,” making it the “real vendor” of the crypto tokens. They said that doing so allowed the crypto exchange listed on Nasdaq to charge transaction fees without following the investor protection regulations for regular equities.

Judge Engelmayer decided that the consumers could not establish that the cryptocurrency exchange owned or sold the crypto tokens they traded on the Coinbase and Coinbase Pro platforms, without stating whether the 79 digital tokens constituted securities.

The judge further determined that Coinbase had no direct involvement in the transactions. However, it was claimed to have promoted the cryptocurrency tokens by emphasizing their “purported value proposition” and taking part in “airdrops” to boost trade volume.

Coinbase previously said that it received subpoenas from the SEC, noting that the securities regulator is seeking information such as the platform’s listing processes.

Gary Gensler, the head of the Securities and Exchange Commission (SEC) in the United States, acknowledged that bitcoin is a commodity but emphasised that most other crypto tokens are securities. He has strongly encouraged cryptocurrency lending and trading platforms to apply for SEC registration.

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