In a legal move that reverberates through the crypto sphere, a group of plaintiffs from California and Florida has initiated a lawsuit against Coinbase, alleging that the platform’s sale of digital assets, including Solana, Polygon, Near, Decentraland, Algorand, Uniswap, Tezos, and Stellar Lumens tokens, constitutes the unlawful offering of securities.
Filed in the United States District Court for the Northern District of California, San Francisco Division, the lawsuit names Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard as plaintiffs. They assert that Coinbase has knowingly breached state securities laws since its inception by peddling digital assets akin to investment contracts or securities.
Central to the plaintiffs’ argument is Coinbase’s admission, as delineated in its user agreement, of being a “Securities Broker,” thereby implicating the exchange’s digital asset sales as securities transactions. The suit further contends that Coinbase Prime, the platform’s brokerage service, also operates as a securities broker.
Seeking full rescission, statutory damages under state law, and injunctive relief via a jury trial, the plaintiffs underscore similarities with another class-action lawsuit against Coinbase, which similarly scrutinizes the exchange’s sale of securities.
In response, Coinbase has challenged the characterization of secondary crypto asset sales as securities transactions and has questioned the applicability of securities regulations.
Despite legal headwinds, Coinbase reported a robust resurgence in the first quarter of 2024, buoyed by improved market performance and the debut of spot Bitcoin exchange-traded funds. The exchange disclosed total revenue of $1.6 billion and net income of $1.2 billion for the quarter, marking a milestone achievement of $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.
In a separate development, John Deaton, a prominent crypto lawyer currently campaigning to unseat Senator Elizabeth Warren, filed an amicus brief on behalf of 4,701 Coinbase customers in support of a motion for interlocutory appeal in the U.S. District Court for the Southern District of New York.