n May 5, a class-action lawsuit was filed against Coinbase Global, along with its two subsidiaries, Coinbase, Inc. and Coinbase Asset Management, LLC, and CEO Brian Armstrong. The lawsuit, lodged by six Coinbase users, claims that the digital assets offered on the exchange qualify as securities, challenging the company's compliance with state securities laws.
Allegations of Securities Violations
The lawsuit points out that several popular tokens listed on Coinbase including Solana (SOL), Polygon (MATIC), and others should be recognized as 'investment contracts' and thus are subject to stringent securities regulations. This classification follows Coinbase's own admission in its user agreement that it acts as a "Securities Broker," thus implicating it in potential legal non-compliance.
Details of the Lawsuit
Filed in the U.S. District Court for the Northern District of California, the lawsuit accuses Coinbase of building its business model on misleading assertions, specifically that it does not sell securities. The plaintiffs—residents of California and Florida—are seeking rescission of their purchase agreements, statutory damages under state law, and injunctive relief to prevent further alleged violations.
Coinbase's Ongoing Legal Battles
This class-action suit adds to Coinbase’s legal troubles, as it currently counters a separate lawsuit from the U.S. Securities and Exchange Commission (SEC), which also alleges securities law violations. Coinbase contends that the secondary sale of crypto assets does not equate to selling securities, a point yet to be resolved as their appeal continues.
A Defining Moment for Coinbase and Crypto Regulation
As Coinbase navigates these compounded legal challenges, the outcome of these cases could set significant precedents for how digital assets are treated under U.S. securities law. This lawsuit underscores the ongoing debate over the classification and regulation of cryptocurrencies, a critical issue for the entire crypto industry.
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