Six Coinbase customers archived a new class action lawsuit against crypto exchange Coinbase Global, two subsidiaries – Coinbase, Inc. and Coinbase Asset Management, LLC. – and its CEO, Brian Armstrong, on May 5.
The lawsuit claims that the digital assets listed on Coinbase are securities. This includes Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ) and Stellar (XLM). The plaintiffs allege that these tokens constitute “investment contracts” subject to state securities laws.
According to the lawsuit, Coinbase itself admits to being a “Securities Broker” in its user agreement. Therefore, the defendants “knowingly, willfully and repeatedly violated state securities laws” and misled their users, the lawsuit filed in the U.S. District Court for the Northern District of California, San Francisco Division, alleges.
The lawsuit further notes:
“(Coinbase’s) entire business model is built on a lie and a dream: the lie is that ‘we don’t sell securities,’ and the dream is that, knowing it would eventually be caught in the lie, ‘it’s better to to ask forgiveness rather than permission.”
The lawsuit was filed by plaintiffs Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi and Brett Maggard of California and Florida. The plaintiffs are seeking full revocation, which means termination of their purchase agreements, along with statutory damages under state law and injunctive relief.
Coinbase has already been sued by the U.S. Securities and Exchange Commission (SEC), claiming the exchange violated securities laws. Coinbase states that secondary sales of crypto assets do not constitute securities. The exchange filed a preliminary appeal after a judge allowed the SEC lawsuit to proceed.
Late last month, pro-XRP attorney John Deaton filed an amicus brief on behalf of 4,701 Coinbase customers in support of a motion for summary judgment. Deaton is currently running an election campaign against Senator Elizabeth Warren.
Earlier this week, Coinbase reported an increase in first-quarter revenue that exceeded expectations to $1.64 billion. The exchange’s transaction revenues nearly tripled to $1.07 billion, while consumer transaction revenues alone rose to $935 million, doubling from the previous year.