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New Class-Action Lawsuit Challenges Coinbase Over Securities Classification

Coinbase under legal scrutiny for allegedly selling digital securities

Coinbase is sued for allegedly selling cryptocurrencies as unregistered securities, highlighting ongoing regulatory challenges in the crypto industry.

Key takeaways:

  • Coinbase faces new legal challenges over its sale of cryptocurrencies like Solana and NEAR as unregistered securities.
  • The lawsuit accuses Coinbase of extensive unregistered solicitation through various advertising channels.

Coinbase, a major US-based cryptocurrency exchange, is currently embroiled in a class-action lawsuit filed in the Northern District of California. The lawsuit accuses Coinbase of offering and selling what are claimed to be digital securities to plaintiffs and other class members without proper registration. The legal challenge lists several popular tokens—including Algorand (ALGO), Near Protocol (NEAR), Polygon (MATIC), Uniswap (UNI), and Solana (SOL)—as the securities in question.

According to the lawsuit, Coinbase has "knowingly" and "intentionally" breached state security laws by operating as an unregistered broker-dealer since it commenced operations. The plaintiffs highlight Coinbase’s aggressive marketing strategies: 

"Coinbase solicited every purchase and sale of Digital Assets by means of general solicitations including those on its website, in social media advertising, traditional advertising, and even Super Bowl commercials." 

This broad approach to promotion, they argue, constitutes solicitation of customers to invest in what are effectively securities offered on its platform.

Legal and regulatory implications

The legal action seeks significant remedies, including the rescission of contracts, injunctive relief, and statutory damages, reflecting the seriousness of the allegations. This lawsuit follows previous legal action from the U.S. Securities and Exchange Commission (SEC), which also targeted Coinbase and other entities for engaging in the sale of unregistered securities, including tokens such as Cardano (ADA). In March, a notable legal victory occurred for the SEC when a court denied Coinbase’s motion to dismiss the case, marking a significant development in the ongoing regulatory scrutiny of cryptocurrency practices.