Judge Engelmayer of the District Court for Southern New York has ruled against Coinbase Global Inc.’s claim that it is not a “statutory seller” under federal law, clearing the way for an investor lawsuit against the company to proceed in New York.
In other words, the U.S.-based exchange must address the class action lawsuits claiming it sold unregistered securities.
Judge Rejects Coinbase’s Argument
According to a Reuters report, the judge rejected Coinbase’s argument that it is not responsible for selling certain crypto assets without registration.
Notably, the case was initially dismissed last year, but after an appeal in the US. Circuit Court, some key parts of the suit were reinstated for another hearing in the District Court.
Following the ruling, the judge explicitly stated that Coinbase’s business model suggests it operates as a direct seller rather than merely a platform for transactions. This means that the lawsuit will now continue in New York.
Investors Accuse Coinbase of Trading Unapproved Crypto Assets
Furthermore, a group of investors filed a lawsuit alleging that Coinbase made 79 crypto assets available for trading even though they were not correctly registered.
The investor argued that this violates financial regulations that require specific approvals before such assets can be sold.
Meanwhile, Coinbase has been involved in an ongoing legal battle with U.S. regulators since last year.
The financial authority accused the company of running an exchange without meeting the legal requirements.
However, Coinbase defended itself in January by petitioning a U.S. appeals court to determine whether secondary market cryptocurrency transactions qualify as securities.
Coinbase Faces Legal Pressure but Pushes for Growth
Despite ongoing legal challenges, Coinbase continues to grow. For example, the exchange’s Layer-2 blockchain network is rapidly becoming a major player in decentralized finance (DeFi) and non-fungible tokens (NFTs).
Likewise, In January, Coinbase CEO Brian Armstrong said that U.S. President Donald Trump’s views on cryptocurrency have been a big topic in the crypto industry, financial markets, and tech world.
At the World Economic Forum (WEF) in Davos, Armstrong mentioned that most of his talks with key leaders were about Trump’s plans for digital assets.
“Basically, every conversation I had with major market leaders was focused on what the Trump administration planned to do on crypto,” Armstrong said.
Last week, the UK’s Financial Conduct Authority (FCA) approved Coinbase to operate as a registered virtual asset service provider (VASP).
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