Coinbase Faces Legal Storm Over Unregistered Securities

In a significant development, a federal judge has ruled that Coinbase, the largest U.S. cryptocurrency exchange, must face a lawsuit alleging illegal sales of unregistered securities. The decision has sparked debate on crypto regulations and asset classification in the U.S.

The lawsuit, filed by customers, accuses Coinbase of selling securities without registering as a broker-dealer. The court ruling is a crucial step in the ongoing financial dispute regarding cryptocurrency governance standards. Judge Paul Engelmayer from the U.S. District Court in Manhattan denied Coinbase's legal defense, which claimed it was outside federal securities law seller requirements. Coinbase maintained that they did not pass ownership of the 79 tokens that customers traded. However, the court questioned this argument, stating that since users of Coinbase transact their cryptocurrency deals directly through the exchange, Coinbase functions as a token vendor.

The judge sustained all state laws brought forward by customers filing complaints in California, Florida, and New Jersey. According to the court, the customers established sufficient grounds to prove Coinbase provided selling services to them under these state laws.

Following the court decision, Coinbase issued a public denial of the claims made against them. In a statement, the company declared, "Coinbase does not list, offer, or sell securities on its exchange." The company expressed confidence in successfully handling the ongoing lawsuit battles in district court.

Coinbase has faced multiple legal battles despite its efforts to deal with them. On June 20, 2023, the U.S. Securities and Exchange Commission filed a lawsuit against Coinbase. The SEC filed charges against the exchange by accusing it of running an unregistered securities platform while failing to become a registered broker. Coinbase moved forward in January 2024 by presenting a petition to a U.S. appeals court seeking authorization that crypto trades should not be considered securities transactions. The exchange submitted that digital trade transactions should be classified as asset sales, which differ from classic securities exchanges. The success of this appeal will determine how U.S. crypto regulations will develop.

Public enforcement agencies are targeting Coinbase with legal action as part of their intensified campaign against digital currency trading platforms. The regulatory authorities are currently investigating if crypto platforms should classify their digital assets as securities. This case has the potential to establish guidelines that will determine the operations of cryptocurrency exchanges throughout America.

As legal battles continue, the crypto