Judge rules Coinbase must face lawsuit over unregistered securities sales

Judge rules Coinbase must face lawsuit over unregistered securities sales. It has sparked debate on crypto regulations and asset classification in the U.S.

A federal judge has ruled that Coinbase must face a lawsuit filed by customers. The lawsuit accuses the largest U.S. cryptocurrency exchange of selling securities illegally without registering as a broker-dealer. The court ruling stands as a crucial step in the current financial dispute regarding cryptocurrency governance standards.

According to Reuters, 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. The court questioned 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.

After the court decision, Coinbase issued a public denial of the claims made against them. As a statement from the company declared “Coinbase does not list offer or sell securities on its exchange.” The company showed faith in successfully handling the ongoing lawsuit battles in district court.

Coinbase Lawsuit Could Shape Future U.S. Crypto Rules

Multiple legal battles have surfaced for Coinbase 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 United States 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 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 industry is closely watching how courts define digital assets and whether new regulations will change how exchanges operate.