Coinbase faces copycat class action suit asserting tokens are securities in echo of pending case
Quick Take
- A class-action lawsuit against Coinbase was recently filed by a serial crypto litigator on behalf of its customers, alleging the exchange sells unregistered securities and operates as an unlicensed broker/dealer.
- The lawsuit, which the company calls “legally baseless,” is similar in language to another class-action suit that was initially dismissed, but recently partially revived under appeal.
Coinbase, the largest cryptocurrency exchange in the United States by volume, is facing a fresh lawsuit from customers who say the company's entire business model was illegal from the start, in an echo of a case already faced by the company.
The lawsuit, filed in the Northern District of California by west coast law firm Scott+Scott and representing plaintiffs located in California and Florida, says Coinbase's sales of digital assets mean the company "knowingly, intentionally, and repeatedly violated state securities laws since it began doing business."
In a statement, the company called the claims "legally baseless," writing, "We have full faith in the judicial process and look forward to addressing them in full at the appropriate time."
The lawsuit is similar is essence to a different case already making its way through the courts, which also claimed harm to consumers from Coinbase selling securities on its platform. Though it was initially dismissed in Feb. 2023, a recent ruling by the 2nd U.S. Circuit Court of Appeals partially revived the case.
This latest lawsuit is also separate from the company's much-publicized legal fight against the SEC over a similar question: whether or not the tokens sold on Coinbase qualify as securities. Coinbase recently filed an interlocutory appeal in that case, contesting a judge's decision to allow the case to move forward.
John T. Jasnoch, the attorney who filed the latest class-action suit, has been similarly involved in class-action litigation against cryptocurrency companies and projects including Safemoon, Internet Computer, Ethereum Max, Terraform Labs, and others, according to a bio on the law firm's website. Many of the defendants represent controversial or failed projects among crypto investors; the promotion of Ethereum Max famously led to a million-dollar penalty for Kim Kardashian from the SEC. Jasnoch didn't respond immediately to a request for comment.
While legal observers expect the SEC's court case to decide the overarching question of whether or not digital assets count as securities rather than class-action suits, it's unclear how this suit's chances would fare if Coinbase were to lose its fight with the SEC.
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