Coinbase Obtains Legal Victory After Judge Dismisses Lawsuit

A US judge dismissed a class-action lawsuit against Coinbase because the platform’s user agreement contradicted the allegations.

Coinbase CEO Brian Armstrong holding up a peace hand gesture
  • A class-action lawsuit filed against Coinbase Global and CEO Brian Armstrong in October 2021 has been dismissed.
  • US District Judge Paul A. Engelmayer ruled that the terms of Coinbase’s user agreement “flatly contradict” the allegations made in the lawsuit.
  • The lawsuit claims were dismissed with prejudice, meaning they cannot be brought to bear again.

Coinbase Global Inc. and CEO Brian Armstrong have secured a legal victory after a class-action lawsuit filed against them was dismissed by a U.S. judge. The proposed class-action suit was filed in federal court in New York in October 2021. It was alleged that 79 tokens offered on the cryptocurrency exchange were being sold as securities without proper broker-dealer registration, and clients were not informed of the consequences.

Lack of Active Solicitation by Coinbase

US District Judge Paul Adam Engelmayer ruled that the terms of Coinbaseโ€™s user agreement did not support the allegations made in the lawsuit and that the platform didn’t actively solicit investments.ย 

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Engelmayer did not determine whether the digital token offerings in question were securities, though he noted his assumption that they were for the purposes of the dismissal request by Coinbase. Engelmayer found that the exchangeโ€™s marketing efforts, such as providing users with descriptions and news updates about cryptocurrency price movements, were insufficient to qualify as an active solicitation.

As a result, the legal claims were dismissed with prejudice and can therefore not be brought to court again. Following the news, Coinbase recorded a significant increase in its stock price, with COIN rising 12.35% in value in the 24h following the ruling and an additional 3.41% in after-market trading.

Coinbase Stock Chart on Google Finance

Coinbase Stock Price, Source: Google Finance, NASDAQ: COIN

It is worth noting that a similar lawsuit against Binance, the worldโ€™s largest crypto platform, was also dismissed by the same court in April 2022. The judge ruled that the claims were filed too late and that U.S. securities laws didnโ€™t apply to Binance, as it is not considered a domestic exchange.

On the Flipside

  • The dismissal of the class-action lawsuit against Coinbase does not guarantee that similar lawsuits will not be filed in the future.
  • The fact that a class-action lawsuit was filed against Coinbase highlights the need for greater transparency and accountability in the industry.
  • The dismissal of the federal securities law claims does not necessarily mean that the allegations made in the lawsuit were false or unjustified.

Why You Should Care

The outcome of the dismissed class-action lawsuit against Coinbase and its CEO has far-reaching consequences for the crypto industry, setting a standard for future legal battles in the industry and sparking conversations about consumer safety, as well as the rules for digital assets.

Read more about Coinbaseโ€™s recent fine from The Dutch Central Bank:
Coinbase Europe Fined $3.6M for Severe Non-Compliance

Read about what Coinbase CEO Brian Armstrongโ€™s ideas for global crypto regulation are:
Coinbase CEO Brian Armstrong Outlines โ€œRealistic Blueprintโ€ for Global Crypto Regulation

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a reporter for DailyCoin covering all Ripple (XRP) developments and market analysis. Kyle's has major XRP holdings, moderate in Solana and Ethereum, and minor holdings across 20+ other cryptocurrencies.

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