By Dean Seal
Shares of Coinbase Global Inc. rose 21% to $79.50 after a federal district judge dismissed a proposed class action accusing the crypto exchange of selling tokens that qualified as unregistered securities.
The suit, filed in October 2021, alleged that nearly 80 of the digital assets traded on the Coinbase exchange fit the description of a security under federal law, and that Coinbase therefore violated the law by selling the tokens without proper registration.
A New York federal judge ruled Thursday that the token buyers behind the suit have made contradictory allegations between their original complaint and a later amended complaint as to whether Coinbase actually held title to or sold the tokens, rather than just facilitate their trading on its exchange, in "an apparent attempt to evade dismissal."
The judge further found that the terms of Coinbase's user agreement, which state that only exchange users hold title over tokens they trade, "flatly contradict" the lawsuit's allegations.
Finding that further amendments would be futile, the judge dismissed the case with prejudice.
The dismissal marks a somewhat rare legal victory for a major player in the crypto space, which is under intense scrutiny by the U.S. Securities and Exchange Commission following last year's selloff in the cryptocurrency market.
SEC Chair Gary Gensler has repeatedly said that most cryptocurrencies are unregistered securities and called for crypto exchanges like Coinbase to register as securities exchanges. Under Mr. Gensler, the agency has been cracking down on the largely unregulated crypto industry.
Write to Dean Seal at firstname.lastname@example.org
(END) Dow Jones Newswires