Coinbase Wins Court Battle Against Customer Lawsuit Over Unregistered Tokens

Coinbase has won a significant victory in court, with a US judge dismissing much of a lawsuit brought by customers who claimed the cryptocurrency exchange was selling unregistered securities.

The suit, which began in 2021, accused Coinbase of allowing trading in over 60 tokens, including XRP and dogecoin, without registering as an exchange or broker-dealer. However, U.S. District Judge Paul Engelmayer ruled that Coinbase is not a statutory seller for most transactions.

The judge found that the majority of trading volume, estimated to be around 99.97%, consisted of 'matched' transactions where Coinbase paired customers' buy and sell orders. In these cases, Coinbase did not pass ownership of tokens to buyers, and therefore did not qualify as a statutory seller under federal securities law.

However, Engelmayer did rule that Coinbase is a statutory seller for 'inventory' transactions, which accounted for the remaining trading volume, totaling at least $178 million in sales. In these cases, Coinbase passed title of tokens to buyers and acted as a dealer and underwriter.