- The lawsuit had alleged Coinbase’s participation in promotions, giving news updates of the crypto price movements of digital assets which according to the plaintiff qualify as unregistered securities.
- The judge turned down the arguments adding those activities “are of a piece with the marketing efforts, ‘materials,’ and ‘services’”
In the latest development, crypto exchange Coinbase managed to win the dismissal of a lawsuit wherein some customers claimed that the exchange facilitated the sale of unregistered securities.
Back in October 2021, some consumers filed a class-action suit against Coinbase in federal court in New York, while seeking damages arising due to the sale of 79 digital assets by Coinbase, which consumers believe to be illegal contracts since the platform didn’t register with the U.S. Securities and Exchange Commission (SEC).
The lawsuit alleges that Coinbase promoted the sale of tokens by providing consumers with token descriptions and their purported values. Besides, the lawsuit also accuses Coinbase of engaging in promotions, giving news updates of the crypto price movements, as well as links to the web stories.
Paul A. Engelmayer, the US District Judge addresses Coinbase’s plea for the dismissal of the lawsuit. However, he didn’t comment on whether the digital assets were securities in the first place. Engelmayer said that had the lawsuit been allowed to proceed, the question of whether those digital assets were securities would have been the “central battleground”.
The Judge further noted that the terms of Coinbase’s user agreement contradict the allegations of the lawsuit which states that Coinbase holds the title to all cryptocurrencies bought and sold on the exchange. Besides, the judge also noted that Coinbase didn’t actively solicit investments.
Commenting on the accusation of promotions, Judge Engelmayer said that those activities “are of a piece with the marketing efforts, ‘materials,’ and ‘services’”. thus, courts don’t see them as active solicitations.
SEC Vs Crypto Exchange
Amid the major blowups of several crypto lending firms and projects last year, the U.S. Securities and Exchange Commission has increased its scrutiny over cryptocurrency exchanges. Besides, the recent collapse of the crypto exchange FTX has forced the SEC to initiate similar actions.
Last month, the U.S. Securities and Exchange Commission (SEC) charged the crypto exchange Gemini to sell unregistered securities to customers as part of the Gemini Earn product. Gemini co-founder Tyles Winklevoss, however, has called the SEC’s charges as ‘super lame’. He added saying:
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As a matter of background, the Earn program was regulated by the @NYDFS and we’ve been in discussions with the SEC about the Earn program for more than 17 months,
The latest development with Coinbase might give some exchanges the confidence to deal with the SEC on securities-related matters. As we know, crypto firm Ripple has been fighting for over two years over the alleged sale of XRP as unregistered securities. Since SEC’s lawsuit, Coinbase suspended the trading of XRP on the platform. However, new developments suggest that Ripple holds the edge in the case and a settlement is likely this year. If so, will Coinbase relist XRP back to the platform?
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