A new class-action lawsuit was launched against Coinbase Global and its subsidiaries Coinbase, Inc. and Coinbase Asset Management, LLC and the CEO, Brian Armstrong. The lawsuit was filed on May 5 in the U.S. The District Court for the Northern District of California charged the crypto exchange with the listing of digital assets that should be classified as securities, breaching state securities laws.
Plaintiffs say listed tokens are securities
The lawsuit lists a number of cryptocurrencies such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar (XLM) as securities by pretending to be ‘investment contracts’. The plaintiffs claim that the tokens should be governed under state securities laws, countering the position that Coinbase has held for a long time that it does not sell securities.
Court documents revealed that Coinbase is a self-identified Securities Broker in its user agreements which is opposite to the public position of the company, thus creating a breach of trust with the users. The plaintiffs, who are residents of California and Florida, Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard are pleading for a full rescission of their purchase agreements, statutory damages, and injunctive relief.
Coinbase faces legal and financial challenges
This lawsuit is another legal trouble for Coinbase, which is already fighting a lawsuit from the U.S. Securities and Exchange Commission (SEC). The suit by the SEC alleges less similar securities violations by concentrating on the type of the crypto-assets peddled through the platform of Coinbase. In retaliation, Coinbase argued that selling the secondary sale of these assets does not amount to selling of securities and has filed an interlocutory appeal after a judge granted the SEC case to proceed.
By contrast, during the same quarter, Coinbase announced a dramatic spike in its revenue which reached $1.64 billion, and the transaction revenue nearly tripled to $1.07 billion. Consumer transaction revenue grew by an impressive 100%, reaching $935 million, a year on year increase. This financial increase is happening under the increasing regulatory scrutiny and the ongoing legal disputes that could define how the exchange is going to operate in the future.
The results of such legal battles might offer consequences for the cryptocurrency market and especially, the definition of digital assets as such and other subsequent regulatory demands.
