A US court has ruled to dismiss a legal action brought against the cryptocurrency exchange Coinbase and its CEO Brian Armstrong by customers. The plaintiffs claimed that the exchange had sold them unregistered securities in the form of 79 different crypto tokens.
Lawsuit Against Coinbase Dismissed
The class action lawsuit was filed in Manhattan in March by customers of cryptocurrency exchange Coinbase (Nasdaq: COIN). According to Reuters, US District Judge Paul Engelmayer dismissed the case on Wednesday, noting that the plaintiffs are not allowed to refile it.
The plaintiffs accused the crypto exchange of selling 79 unregistered securities in order to promote them and not registering as a stockbroker. The lawsuit was filed to seek damages for the solicitation or sale of crypto tokens, which the plaintiffs said were illegal contracts. Coinbase is not registered with the US Securities and Exchange Commission (SEC).
The plaintiffs argued that, unlike some cryptocurrency trading and buying platforms that only match buyers and sellers, they were able to buy and sell crypto on their own terms. This, they said, was what allowed the crypto exchange to charge transaction fees without adhering to disclosure guidelines that are applicable to traditional securities designed to protect investors.
It is not clear whether the 79 crypto tokens can be considered securities. Judge Engelmayer noted that the buyers couldn’t prove that the cryptocurrency exchange owned the crypto tokens or that they purchased them from Coinbase and Coinbase Pro platforms.
Additionally, the judge ruled that Coinbase did not perform the transactions directly, despite its alleged sales of crypto tokens. The court said that Coinbase’s “supposed value proposition” was to increase the trading volume through “airdrops” of tokens.
Coinbase has previously reported that it has received subpoenas from the SEC. This was in connection with the fact that the securities regulator is gathering information about the platform’s listing process.
US Securities and Exchange Commission (SEC) Chairman Gary Gensler has recently said that while bitcoin is confirmed to be a commodity, all crypto tokens are securities and should be regulated accordingly. He has repeatedly urged cryptocurrency lending and trading platforms to register and come back in order to be able to sell and buy them again.
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