Apart from legal troubles with the US SEC, Coinbase is also facing legal action from individual plaintiffs.
They claim the crypto exchange sold and traded unregistered securities. Let’s discover more about this news for Coinbase.
Coinbase Wins Court Case Amid SEC
However, the crypto exchange has secured a favorable ruling. The United States Court of Appeals for the Second Circuit ruled that Coinbase’s secondary sale of cryptocurrencies was not a violation of the Securities Exchange Act.
Coinbase disputed the relevance of securities laws. It claimed that secondary sales of crypto assets did not fit the requirements for securities transactions. After considering several factors, the court opted to overrule some of the rulings made by the lower court. It, however, upheld others.
COINBASE WINS AGAINST THE SEC $COIN
“One of the top crypto exchanges, Coinbase, has achieved a major victory in an ongoing legal battle. The U.S. Court of Appeals for the Second Circuit ruled in favor of Coinbase, confirming that secondary sales of cryptocurrencies on its… pic.twitter.com/EIKs9r5KN9
— amit (@amitisinvesting) April 6, 2024
The Securities Act’s Section 12(a)(1) established Coinbase’s probable liability for selling unregistered securities, according to the court. It did, however, deny the plaintiffs’ Securities Exchange Act claims. It found inadequate evidence of contracts unique to the transaction that would have allowed for Section 29 rescission.
The court’s ruling was dependent on how Coinbase’s user agreements—which changed over time—were interpreted. The use of different language across different versions complicated crucial aspects of the case.
Reaction to the Ruling
The plaintiffs noted that their lawsuit promotes investor safety in the crypto market. They view the verdict as a step forward in regulating crypto exchanges. Coinbase claims the ruling provides clarity to its long-held belief. It supports its stance that secondary cryptocurrency sales aren’t equal to securities transactions.
We appreciate the Second Circuit confirming today what is clear under the federal securities law: there’s no private liability for the secondary trading of digital assets on exchanges like Coinbase. Why? Because contracts matter. 1/2
— paulgrewal.eth (@iampaulgrewal) April 5, 2024
Reacting to the ruling, Coinbase chief legal officer Paul Grewal wrote on X: “We appreciate the Second Circuit confirming today what is clear under the federal securities law: there’s no private liability for the secondary trading of digital assets on exchanges like Coinbase. Why? Because contracts matter.”
Yes sir
— paulgrewal.eth (@iampaulgrewal) April 6, 2024
What does this Mean for Crypto?
Does Coinbase’s recent victory affect the crypto market? Some experts believe it holds broader implications for the industry. The ruling adds an extra layer of legitimacy to cryptocurrencies. It also reaffirms that the secondary sale of cryptocurrencies does not qualify as securities. However, investors have to tread with caution. Until there are clearly stated policies, we can never be so sure.
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