Coinbase Consumer Suit on Securities Claim Revived on Appeal

(Bloomberg) — A US appeals court revived a 2021 consumer lawsuit against Coinbase Inc. accusing the cryptocurrency exchange of facilitating the sale of unregistered securities.

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The 2nd US Circuit Court of Appeals said Friday the federal judge in New York who dismissed the suit last year shouldn’t have relied on a December 2021 user agreement because Coinbase had updated the language from earlier versions. The three-judge appeals panel sent the case back to the district court to determine which user agreement should be used in determining whether to dismiss the class-action suit.

US District Judge Paul A. Engelmayer in February last year said the 2021 user agreement contradicted allegations in the complaint, which claimed the company holds title to the digital assets that are bought and sold on the exchange.

While the appeals court reversed that ruling, it affirmed Engelmayer’s dismissal of claims raised under the US Securities and Exchange Act in which the plaintiffs sought to rescind some transactions. The consumers who sued had failed to identify specific contracts that meet the requirements for cancellation under the law, the panel ruled.

A representative for Coinbase didn’t respond to a request for comment.

The proposed class-action lawsuit seeks damages arising from the sale or soliciting of 79 digital assets that the consumers say amounted to illegal contracts because the platform is not registered with the SEC.

Jordan Goldstein, a lawyer for the plaintiffs, said Friday they “look forward to pursuing these claims” in district court.

The suit alleges Coinbase promoted the sale of the tokens by providing users with descriptions and their purported value, as well as by participating in promotions, giving news updates about cryptocurrency price movements and links to web stories.

The case is Louis Oberlander v. Coinbase Global Inc., 23-cv-184, US Court of Appeals (2nd Circuit).

–With assistance from Chris Dolmetsch.

(Updates with comment from the group behind the lawsuit.)