Coinbase is once again in legal trouble, except this time, it’s not with the Securities and Exchange Commission (SEC). According to crypto media platform CCN, six investors are claiming that the firm “has misled users and illegally sold unregistered securities since its inception” – allegations similar to those made against it by the SEC in 2023. The situation highlights the “sense of disarray” in the US crypto landscape.
The “unregistered securities” listed in the court filing are Solana, Uniswap, Stellar, Decentraland, Algorand, Polygon, Tezos, and Near Protocol. The plaintiffs argue that Coinbase has even admitted its guilt – by acknowledging its role as “securities broker” in its user agreement.
According to CCN’s report, Coinbase’s user agreement states that it “does not offer securities services” in the US. However, it is still considered “a securities intermediary” because the digital assets it offers count as “financial assets” under Californian regulations. A user’s wallet is thus defined as a “securities account”.
Existential crisis
As CCN puts it, “Coinbase’s very existence is a catch-22”. Its constant legal woes stem from its lack of a defined status. It “remains the custodian of the largest spot Bitcoin (BTC) exchange-traded funds (ETFs) in the US as approved by the SEC”, despite also being sued by the SEC for being an unregistered crypto exchange offering illegal crypto products.
The plaintiffs are calling for “a full rescission of all digital asset transactions on Coinbase, as well as statutory damages and injunctive relief”. In a statement to CCN, Coinbase claims the litigation to be “legally baseless”.