Coinbase Wins SEC Lawsuit

Coinbase Wins Dismissal of Customer Class Action Lawsuit, Stock Surges

Cryptocurrency exchange Coinbase (COIN) has won dismissal of a class action lawsuit claiming the sale of unregistered securities.

InvestopediaFull Bio

Coinbase Had No Direct Role in Token Sales

Customers of Coinbase crypto exchange filed the suit under federal securities laws and accused the exchange of acting as an "intermediary," making it the "actual seller" of the tokens.

Despite allegations that the exchange promoted tokens by highlighting their "purported value proposition" and participating in "airdrops," Judge Paul Engelmayer of the U.S. District Court of the Southern District of New York ruled that Coinbase had no direct role in the transactions.

A crypto airdrop is a marketing strategy that involves sending free coins or tokens to wallet addresses of members of the blockchain community, sometimes in return for a small service, such as retweeting a post sent by the company issuing the currency.

Judge Engelmayer relied on Coinbase's user agreement, which said users were neither buying nor selling digital assets from the exchange and that "at all times" the title of those assets remained with the user.

The ruling follows a similar dismissal of a case against rival exchange Binance in March 2022, which was also cited in the Coinbase dismissal.23

The lawsuit has been dismissed with prejudice at the federal level, but without prejudice at the state level, leaving the plaintiffs an option to pursue the matter before state courts.