Coinbase Lawsuit Partly Revived by Appeals Court Over Securities Dispute

Coinbase Lawsuit Partly Revived by Appeals Court Over Securities Dispute

RegulationLaw

By Jakub Lazurek

09 Apr 2024 (3 months ago)

2 min read

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Appeals court revives Coinbase lawsuit on unregistered securities trading

In February 2023, Coinbase successfully dismissed a lawsuit from 2021 but recently saw part of it revived by a US appeals court.

The case accuses Coinbase of trading securities without registration.

Judge Paul Engelmayer initially ruled in favor of Coinbase, stating that the company, not claiming ownership of the 79 disputed tokens, wasn't the direct seller.

Engelmayer's decision also included that the plaintiffs couldn't reverse their transactions due to insufficient evidence of a formal agreement allowing such actions.

The appellate court agreed, emphasizing the absence of a specific contract for rescission.

The ongoing debate over whether assets can be considered securities without a physical contract has sparked numerous legal challenges between crypto exchanges and the SEC.

Coinbase's Chief Legal Officer, Paul Grewal, welcomed the court's decision, reinforcing the stance that contract specifics are crucial for determining liability in digital asset trades.

In a related issue, the SEC alleged that Coinbase's program, which lets investors stake tokens, amounted to selling unregistered securities.

This program is under scrutiny because the tokens involved are seen by the SEC as investment contracts, based on the expectation of profits.

A federal judge has dismissed some of the SEC's claims against Coinbase's Wallet program, but the larger case continues.

The appellate court has now redirected the lawsuit back to the district court to determine the relevant agreement and its version.

This series of legal events underscores the complexities of regulating cryptocurrency and its clash with traditional securities laws, marking a critical period for the future of digital asset trading and regulation.

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