Coinbase, a leading cryptocurrency exchange, finds itself embroiled in a multi-front legal war. From disgruntled investors to the watchful eye of the SEC, the company faces challenges that threaten its operations and cast a shadow over the future of cryptocurrency regulation.
Coinbase accused of selling unregistered securities
A new class action filed in California alleges that Coinbase knowingly violated the state’s securities laws by selling unregistered securities. The plaintiffs, a group of investors, are targeting specific tokens like Solana and Uniswap, arguing that they should be classified as investments and not just digital assets.
They point to a possible contradiction within the exchange’s own user agreement, which could define the company as a “securities broker.” This lawsuit echoes a similar lawsuit already underway, suggesting a growing trend of investor dissatisfaction with Coinbase’s crypto offerings.
A screenshot of the class action lawsuit filed against Coinbase. Source: US District Court Northern District of California.
Coinbase Vs. SEC: a battle for regulatory clarity
The biggest legal fight involves the U.S. Securities and Exchange Commission (SEC). The SEC accuses Coinbase of acting as an unregistered securities exchange and broker-dealer by offering unregistered tokens. The company categorically denies these accusations and has appealed the initial decision.
This clash highlights the central problem: the lack of clear regulations governing cryptocurrencies. Coinbase, like many in the industry, views the lawsuit as an overreach by the SEC, which is pushing for a more defined regulatory framework that fosters innovation without stifling growth.
Bitcoin is now trading at $64.493. Chart: TradingView
John Deaton joins the fray
The involvement of John Deaton, a prominent crypto lawyer known for his advocacy against regulatory overreach, adds another layer of intrigue. Deaton filed an amicus brief in support of Coinbase in the SEC battle.
The move signifies the industry’s unified front against what it sees as stifling regulations. Deaton’s pro bono work highlights the high stakes, not just for the crypto exchange, but for the entire crypto ecosystem.
Beyond the SEC: GYEN and staking programs face scrutiny
Coinbase’s legal troubles extend beyond the SEC lawsuit. Another case accuses the exchange of mismanaging the stablecoin GYEN, a cryptocurrency linked to the Japanese yen. The plaintiffs allege that the company promoted and traded GYEN despite knowledge of its volatility, resulting in significant losses for investors.
Additionally, the company’s staking program, which allows users to earn rewards by holding cryptocurrencies, has attracted the attention of regulators. The SEC considers staking an unregistered security, while several US states have joined the case, further complicating Coinbase’s legal landscape.
Featured image from Salt and LightTradingView chart
