Coinbase has emerged victorious in an ongoing lawsuit as the United States Court of Appeals for the Second Circuit ruled in its favor, confirming that secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act. The ruling affects a nationwide group of individuals who traded tokens on Coinbase between October 8, 2019, and March 11, 2022.
At the center of the dispute was whether cryptocurrencies traded on Coinbase met the criteria for securities. The plaintiffs alleged that Coinbase’s actions constituted offering and selling unregistered securities, leading to federal and state law claims related to securities legislation.
However, the court sided with Coinbase, arguing that secondary crypto asset sales did not meet securities transaction criteria, thus overturning some lower court decisions while upholding others. The ruling hinged significantly on interpreting Coinbase’s evolving user agreements, with discrepancies hindering a definitive resolution.
While the plaintiffs view the ruling as a step forward in holding crypto platforms accountable under securities laws, Coinbase sees it as reinforcing the notion that secondary crypto sales are not securities transactions. The verdict underscores the need for regulatory clarity to foster innovation in the crypto industry and has significant implications for overseeing cryptocurrencies and digital assets.
Coinbase’s chief legal officer, Paul Grewal, expressed gratitude for the court’s decision, and the importance of contracts in determining liability for secondary trading of digital assets on exchanges like Coinbase under federal securities law.
