Nasdaq Jumps 20% After Coinbase Dismisses Securities Suit

In a rare victory for crypto, Coinbase shares surged after a Manhattan federal judge dismissed a class-action lawsuit against the cryptocurrency exchange on Wednesday, ending more than two months of litigation.

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Overnight, shares of the company shot up over 20%, and were trading over 20% higher by midmorning on Thursday.

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There was a claim by the plaintiffs that Coinbase owned the crypto assets that it later directly sold to end users, and that because Coinbase owned the assets, the company held title to the tokens. Nevertheless, in a 27-page opinion, United States it was noted by the District Judge Paul Engelmayer that the plaintiffs' claims contradicted each other and that Coinbase's user agreement explained that users cannot purchase or sell digital currency on the exchange, and that the title to a user's currency always remained with the user, at all times.

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Upon receiving the federal claims, the judge dismissed them with prejudice. Engelmayer wrote that the class action complaint against Coinbase was dismissed because it failed to establish Coinbase's status as an "immediate seller" or as a title holder as a result of the dismissal of another crypto class action against Binance.

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It was also alleged by the plaintiffs that Coinbase's marketing was showing an effort to solicit a sale of securities through its marketing. This argument was rejected by Engelmayer.

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A lawsuit was filed in October 2021 alleging that Coinbase CEO Brian Armstrong was acting as the exchange's primary "control person" during the time of the suit.

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In response to the ruling, the company declined to comment. The announcement comes at a time when Securities and Exchange Commission Chair Gary Gensler is aggressively pursuing actions within the crypto space in part by arguing that they are securities offerings.

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The Gensler law firm announced earlier this year that it would be taking joint enforcement action against crypto exchange Gemini and the now bankrupt crypto lender Genesis Trading. There was no question at the time that these charges made it clear to the marketplace and to the investing public that crypto lending platforms as well as other intermediaries are required to comply with our time-tested securities laws.