The logo of Coinbase Global Inc, the largest US cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others in Times Square in New York, US, April 14, 2021.
Shannon Stapleton | Reuters
Coin base Shares rose after a Manhattan federal judge dismissed a class action lawsuit against the cryptocurrency exchange on Wednesday in a rare cryptocurrency legal victory.
Shares rose overnight, rising more than 20% Thursday morning.
The prosecutors alleged that Coinbase owned the crypto assets it later sold directly to end users and that Coinbase’s ownership meant it had “title” over those tokens. But in a 27-page opinion, U.S. District Judge Paul Engelmayer noted contradictory claims by the plaintiffs and pointed to Coinbase’s user agreement, which stated that users did not buy or sell digital currencies from the exchange and that “at all times” the title of a user’s currency remained with the user.
The judge dismissed the federal claims with prejudice. Citing the rejection of another crypto class action against Binance, Engelmayer wrote that the class action complaints did not establish Coinbase’s status as a “direct seller” or rights holder.
The plaintiffs had also alleged that Coinbase’s marketing showed an attempt to sell securities. Engelmayer rejected that argument.
The lawsuit was filed in October 2021 and involved Coinbase CEO Brian Armstrong as the primary “controlling person” at the exchange.
The company declined to comment on the ruling. It comes as Securities and Exchange Commission Chairman Gary Gensler is aggressively pursuing actions in the crypto space, in part by claiming they represent securities offerings.
Earlier this year, Gensler announced a joint enforcement action against crypto exchange Gemini and now-bankrupt cryptocurrency lender Genesis Trading. At the time, Gensler said those fees “made it clear to the market and the investing public that crypto lending platforms and other intermediaries must comply with our time-tested securities laws.”
