Three Coinbase users have proposed a class action lawsuit against Coinbase accusing the company of offering unregistered securities in connection with 79 assets listed by the exchange.
COINBASE GLOBAL, INC, COINBASE INC, and BRIAN ARMSTRONG where all named in a lawsuit filled March 11, 2022. CHRISTOPHER UNDERWOOD, LOUIS OBERLANDER, and HENRY RODRIGUEZ are named as the plaintiffs.
The lawsuit alleges the cryptocurrency exchange is operating as an unregistered securities broker.
The three plaintiffs named several popular large-cap cryptocurrencies in its list of alleged unregistered securities including Cardano ADA, Polkadot DOT, Decentraland MANA, Shiba Inu SHIB, Dogecoin DOGE, and many others.
The plaintiffs are claiming Coinbase is liable for their losses while trading these coins from October 2019 to the time of writing this article. They, however, added that Bitcoin BTC and Ethereum ETH should not be considered unregistered securities because of their decentralized nature, stated the lawsuit.
One would have to wonder how they could have been in crypto from 2019, purchased some of the best performers of the bull run and have losses. But that’s for another article. Time will probably bring out more facts in the case and hopefully provide some clarity for the industry going forward.
The suit uses a number of criteria to distinguish the assets including in the suit from those which are not, and addresses each of the 79 listed assets individually. For example, most of the assets complained of in the suit are ones with little or no utility and the trading of which is focused on investment profit, an argument which speaks directly to the limbs of the Howey test for securities. Similarly, the suit argues that any token which was issued via ICO to be a security, a line the SEC has previously argued with success in its action against Telegram.
Last year, Coinbase suspended trading of Ripple XRP on its platform after an SEC lawsuit named XRP an “unregistered security.”