Coinbase's Legal Hurdle: Judge Rules Against Crypto Exchange in Securities Lawsuit

Coinbase, a leading U.S.-based cryptocurrency exchange, faces a significant legal hurdle as a judge in the Southern District of New York has ruled against its argument that it is not a "statutory seller" under federal law. This decision clears the way for an investor lawsuit against the company to proceed in New York, alleging that Coinbase sold unregistered securities.

The ruling by Judge Paul Engelmayer rejects Coinbase's argument that it is not responsible for selling certain crypto assets without registration. The case was initially dismissed last year but was reinstated following an appeal in the U.S. Circuit Court. The judge explicitly stated that Coinbase's business model suggests it operates as a direct seller rather than merely a platform for transactions, leading to the continuation of the lawsuit in New York.

A group of investors filed a lawsuit accusing Coinbase of making 79 crypto assets available for trading without proper registration. The investors argued that this violates financial regulations that require specific approvals before such assets can be sold. Coinbase has been involved in an ongoing legal battle with U.S. regulators since last year, with the financial authority accusing the company of running an exchange without meeting the legal requirements. In January, Coinbase petitioned a U.S. appeals court to determine whether secondary market cryptocurrency transactions qualify as securities.

Despite the ongoing legal challenges, Coinbase continues to grow and expand its presence in the cryptocurrency market. The exchange's Layer-2 blockchain network has become a major player in decentralized finance (DeFi) and non-fungible tokens (NFTs). In January, Coinbase CEO Brian Armstrong discussed the impact of U.S. President Donald Trump's views on cryptocurrency during his talks with key leaders at the World Economic Forum (WEF) in Davos. Armstrong mentioned that most of his conversations with major market leaders were focused on Trump's plans for digital assets.