The question of whether the cryptocurrency traded on Coinbase could be classified as securities was the main focus of attention. The Court of Appeals has overturned some of the lower court’s decisions while upholding others.
In an ongoing trial, crypto exchange Coinbase has achieved a significant victory. The U.S. Court of Appeals for the Second Circuit ruled in favor of the exchange, confirming that Coinbase’s platform does not violate the Securities Exchange Act.
The court’s ruling will impact many individuals across the country who used Coinbase to trade tokens between October 8, 2019, and March 11, 2022. The central issue in the disagreement was whether the crypto traded on Coinbase could be considered securities.
The plaintiffs in the case invoked sections 5, 15(a)(1), 20(a), and 29(b) of the Securities Exchange Act of 1934, as well as sections 12(a)(1), 15, and 5 of the Securities Act of 1933 in their federal claims. They also brought claims concerning securities laws in New Jersey, Florida, and California on behalf of a national class of plaintiffs.
The plaintiffs argued that Coinbase was selling unregistered securities and violating other securities regulations. However, Coinbase contended that the sale of secondary crypto assets did not meet the requirements for securities transactions, challenging the applicability of securities laws. After examining all the evidence, the Court of Appeals reversed some of the lower court’s decisions and upheld others.
In determining whether Coinbase could be held liable for selling unregistered securities, the court analyzed Section 12(a)(1) of the Securities Act. However, it rejected the plaintiffs’ requests for rescindment under Section 29 of the Securities Exchange Act due to a lack of evidence regarding the specific contracts involved in the transactions. The court’s judgment was significantly influenced by the interpretation of Coinbase’s user agreements, which had changed over time.
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