Recently, six Coinbase customers took legal action against the popular cryptocurrency exchange, Coinbase Global, as well as its subsidiaries Coinbase, Inc. and Coinbase Asset Management, LLC. The lawsuit, filed on May 5, accuses Coinbase of listing digital assets that are considered securities. Among the tokens mentioned are Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar (XLM). The plaintiffs argue that these tokens should be classified as ‘investment contracts’ and thereby subject to state securities laws.
The lawsuit alleges that Coinbase’s user agreement acknowledges the exchange as a “Securities Broker,” which contradicts the platform’s claim of not selling securities. The plaintiffs claim that Coinbase knowingly and intentionally violated state securities laws and deceived its users. The legal action was filed in the U.S. District Court for the Northern District of California, San Francisco Division.
The plaintiffs, including individuals from California and Florida, are seeking full recission of their purchase agreements, along with statutory damages under state law and injunctive relief. They assert that Coinbase’s entire business model is based on falsehoods and operates under the premise of seeking forgiveness rather than permission.
Coinbase is already embroiled in a separate lawsuit with the U.S. Securities and Exchange Commission (SEC) regarding alleged securities violations. The exchange argues that the secondary sale of crypto assets should not be categorized as securities. Despite these legal challenges, Coinbase reported a significant surge in revenue for the first quarter, exceeding expectations with a total revenue of $1.64 billion. Transaction revenue nearly tripled to $1.07 billion, with consumer transaction revenue alone reaching $935 million.
Support and Opposition
Notably, pro-XRP lawyer John Deaton filed an amicus brief in support of an interlocutory appeal on behalf of 4,701 Coinbase customers. Deaton, who is currently involved in an election campaign against Senator Elizabeth Warren, advocates for revisiting the legal implications of Coinbase’s operations.
Coinbase’s legal battles highlight the complexities of regulating the cryptocurrency industry. The allegations of securities violations raise questions about the exchange’s compliance with state laws and the implications for its users. As the legal proceedings unfold, Coinbase’s financial performance continues to demonstrate the platform’s significance in the digital asset landscape.
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