Coinbase Faces Class Action Lawsuit Over Alleged Security Law Violations

By: Eva Baxter

Coinbase, a leading global cryptocurrency exchange, is facing a new class-action lawsuit filed by six of its users, alleging that the exchange is operating in violation of securities laws. The lawsuit, filed on May 5, implies that some of the digital assets listed on the Coinbase platform, including Solana, Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos, and Stellar, are categorized as securities and, as such, are subject to state security laws.

The plaintiffs are arguing that Coinbase, which is identified as a 'Securities Broker' as per its user agreement, has deliberately and repeatedly violated state securities laws and has thus deceived its users. In fact, the lawsuit notes that Coinbase's entire business model is constructed on a false claim and a dream - the false claim being that they do not sell securities and the dream is their belief that it's better to ask for forgiveness than permission, following inevitable exposure of the claim.

The legal action was filed with the U.S. District Court for the Northern District of California, San Francisco Division by plaintiffs from California and Florida seeking for full recission, meaning a cancellation of their purchase agreements, along with statutory damages under state law and injunctive relief.

In the meantime, Coinbase continues to assert that secondary selling of crypto assets does not constitute securities, amidst a pre-existing lawsuit by the U.S. Securities and Exchange Commission (SEC) alleging the exchange's violation of securities laws. This new lawsuit arrives concurrently with Coinbase's recent announcement of a surge in Q1 revenue to $1.64 billion, surpassing expectations.