Coinbase wins lawsuit: Second Circuit rules secondary crypto sales not subject to Securities Exchange Act. Plaintiff’s nationwide class action dismissed. Regulatory clarity needed for industry innovation. CLO expresses gratitude for ruling.
Coinbase, one of the leading cryptocurrency exchanges, has achieved a significant victory in an ongoing lawsuit. The U.S. Court of Appeals for the Second Circuit has ruled in favor of Coinbase, confirming that the secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act.affects a nationwide group of people who traded tokens on Coinbase from Oct. 8, 2019, to March 11, 2022.
However, Coinbase contended that secondary crypto-asset sales didn’t meet securities transaction criteria, disputing the relevance of securities regulations. The Court of Appeals examined various aspects, ultimately overturning some of the lower court’s decisions while upholding others. The court determined Coinbase’s potential liability under Section 12 of the Securities Act for vending unregistered securities. Yet, it rejected the plaintiffs’ Securities Exchange Act claims, citing insufficient proof of transaction-specific contracts needed for rescission under Section 29.The court’s decision hinged significantly on interpreting Coinbase’s user agreements, which evolved over time. Varying language across versions complicated title and privity issues critical to the case.
The plaintiffs view the ruling as a step forward in holding crypto platforms accountable under securities laws, advocating for investor protection in the evolving crypto space. Conversely, Coinbase asserts the decision reinforces its position that secondary crypto sales aren’t securities transactions.
Furthermore, Coinbase stressed the necessity of regulatory clarity to foster innovation within the industry. The Court of Appeals’ verdict has substantial consequences for overseeing cryptocurrencies and digital assets.gratitude on X social platform, stating that the Second Circuit reaffirmed that there is no private liability for secondary trading of digital assets on exchanges like Coinbase under federal securities law, emphasizing the significance of contracts.
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