- The 2nd US Circuit Court of Appeals reversed a ruling that dismissed a class action lawsuit against Coinbase.
- The proposed lawsuit seeks damages from the sale of 79 digital assets.
- Coinbase CLO applauds the Second Circuit for confirming that exchange has no private liability for the secondary trading of digital assets.
Coinbase is facing a class action lawsuit brought against it by users seeking damages arising from the sale or solicitation of 79 digital assets that they allege amount to illegal contracts because the platform is not registered with the US Securities and Exchange Commission.
While the 2nd US Circuit Court of Appeals revived the lawsuit, and this may look like a setback for Coinbase, it affirmed Judge Paul A. Engelmayer’s dismissal of claims raised under the US Securities and Exchange Act.
Coinbase faces heat from class action lawsuit revival
A class action lawsuit against the exchange that was dismissed by a Judge in 2021 has been revived by the 2nd US Circuit Court of Appeals. While this may appear as a setback for the exchange platform, Chief Legal Officer Paul Grewal applauded the court for confirming that exchange has no private liability for the secondary trading of digital assets on its platform.
We appreciate the Second Circuit confirming today what is clear under the federal securities law: there's no private liability for the secondary trading of digital assets on exchanges like Coinbase. Why? Because contracts matter. 1/2
— paulgrewal.eth (@iampaulgrewal) April 5, 2024
The consumers who filed the class action lawsuit failed to identify specific contracts that meet the requirements for cancellation under the law, according to the panel’s ruling.
The 2nd US Circuit Court of Appeals said that the federal judge in New York who dismissed the suit last year shouldn’t have relied on a December 2021 user agreement. The three-judge appeals panel sent the case to the district court to help determine which user agreement should be used to determine whether the class-action can be dismissed.
The lawsuit, Louis Oberlander vs. Coinbase Global Inc. alleges that Coinbase promoted the sale of the tokens by providing users with descriptions and their purported value. The exchange allegedly engaged in promotions, shared news and updates about crypto price movements to users and shared web stories.
CLO Grewal’s comments show how the exchange is prepared to tackle the lawsuit, and believes in “contracts” that users enter in, while using the exchange platform.
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