A lawsuit against Coinbase and its CEO Brian Armstrong was dismissed on Wednesday. The judge exposed a flaw in the plaintiffs’ claim.
In the United States District Court of Southern New York on Wednesday, the judge dismissed the lawsuit against Coinbase and its CEO. The case had alleged that 79 of the cryptocurrencies listed on Coinbase were not properly registered securities and that customers were not informed.
The judge did not enter into whether the cryptocurrencies were securities or not and just assumed that they were. Judge Paul Engelmayer said that the Coinbase user agreement contradicted the plaintiffs’ claims that Coinbase was the “actual seller” of the tokens, and did not solicit sales per a strict legal definition of such.
The original lawsuit included a 255-page document that laid out in detail the case for every single one of the 79 cryptocurrencies being a security under the Howey Test, stating that they were all an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
CoinTelegraph quoted Philip Moustakis, counsel at Seward & Kissel as saying that the “painstaking” examination of all of these tokens highlighted the need for greater regulatory clarity from the SEC. He stated:
“Unless and until the SEC provides further guidance and a path to compliance for token issuers, crypto lending products, exchanges, and other market participants, the question of whether any particular cryptoasset or transaction is a security will be litigated one at a time,”
The dismissal of the lawsuit against Coinbase might be taken as a disappointment for the SEC, whose Chairman Gary Gensler has let it be known that crypto exchanges are definitely in the crosshairs of the regulator.
Moustakis highlighted this in a CoinTelegraph article published earlier today, saying:
“The case is not much of a surprise. After all, the SEC has signaled that it intends to pursue investigations or actions against crypto-exchanges.”
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