Coinbase, one of the leading cryptocurrency exchanges in the United States, and its CEO Brian Armstrong are embroiled in a new legal battle as they face a class action lawsuit filed in the U.S. District Court for the Northern District of California. The lawsuit accuses Coinbase of misleading investors by selling digital assets that may be deemed securities.
The plaintiffs, comprising individuals from California and Florida including Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard, contend that tokens such as Solana’s SOL, Polygon’s MATIC, and six others should be classified as securities under state securities laws. They argue that Coinbase’s own user agreement identifies it as a “Securities Broker,” thereby implying that the digital assets it offers for sale may fall under the category of securities.
According to the lawsuit, Coinbase’s business model has allegedly operated in a legal gray area since its inception over a decade ago. The plaintiffs assert that Coinbase’s assertion of not selling securities was a deliberate misrepresentation, and they claim that Coinbase Prime brokerage services also deal with securities.
The class action lawsuit seeks extensive legal remedies, including the rescission of affected transactions, statutory damages under state law, and injunctive relief. Opting for a jury trial to adjudicate the claims, the plaintiffs underscore the seriousness of their allegations against Coinbase.
This legal challenge adds to Coinbase’s ongoing legal woes, including a separate confrontation with the U.S. Securities and Exchange Commission (SEC) regarding the classification of tokens sold on its platform as securities. Currently, Coinbase is appealing a court decision allowing the SEC case to proceed.
These lawsuits shed light on the intricate regulatory landscape of the cryptocurrency industry, where the classification of digital assets remains a subject of debate and legal scrutiny. The outcomes of these legal proceedings are anticipated to shape the future of digital asset sales and regulations in the United States.