Key facts
- A judge dismissed most of a lawsuit accusing Coinbase of illegally selling unregistered securities.
- The ruling applied to matched transactions, which accounted for 99.97% of trading volume.
- Customers can still pursue claims related to inventory transactions, estimated at $178 million.
- The judge found Coinbase was not a statutory seller for matched trades but was for inventory trades.
- The lawsuit began in 2021 and involved claims over 60 tokens, including XRP and dogecoin.
Coinbase has largely won a lawsuit where customers accused the cryptocurrency exchange of illegally selling unregistered securities. U.S. District Judge Paul Engelmayer in Manhattan dismissed claims related to "matched" transactions, where Coinbase paired customer buy and sell orders, which represented an estimated 99.97% of trading volume, amounting to hundreds of billions of dollars.
The judge, however, allowed customers to proceed with claims concerning "inventory" transactions, where Coinbase fills orders using tokens it owns. These transactions accounted for the remaining trading volume, totaling at least $178 million. Engelmayer ruled that Coinbase was not a statutory seller for matched transactions because it did not pass ownership of tokens to buyers or solicit the trades. For inventory transactions, he found Coinbase acted as a dealer and underwriter, thus qualifying as a statutory seller.
The lawsuit, which began in 2021, saw other federal securities law claims dismissed in 2023. A cryptocurrency trade group, Digital Chamber, supported Coinbase, arguing that an expansive definition of statutory seller could hinder innovation. The U.S. Securities and Exchange Commission had also previously sued Coinbase over allegations of trading unregistered securities.