Lawsuit Details: 79 Tokens Allegedly Sold as Unregistered Securities
A class-action lawsuit has been filed against Nasdaq-listed crypto exchange Coinbase, accusing it of allowing customers to buy and sell 79 cryptocurrencies that should have been registered as securities with the U.S. Securities and Exchange Commission (SEC) and state regulators. The complaint, filed by lead plaintiffs Christopher Underwood, Louis Oberlander, and Henry Rodriguez, covers all individuals or entities that traded any of these tokens on Coinbase or Coinbase Pro from October 8, 2019 to the present. The list includes well-known assets such as XRP, Dogecoin (DOGE), Shiba Inu (SHIB), as well as Cardano (ADA), Solana (SOL), Chainlink (LINK), and many others.
Plaintiffs’ Claims: Lack of Investor Protection
The plaintiffs argue that Coinbase failed to disclose the securities status of these tokens, depriving investors of the mandatory disclosures that accompany traditional securities offerings. Instead, buyers only receive white papers that do not meet federal or state prospectus requirements. The lawsuit repeatedly cites SEC Chair Gary Gensler, who has stressed that many crypto platforms list tokens likely to be securities without adequate investor safeguards. The plaintiffs state that without SEC registration, purchasers lack access to critical information about the issuers and the tokens themselves.
Damages and Legal Context
The class-action seeks to recover over $5 million in damages, plus trading fees and interest, along with attorneys’ fees and costs. The case echoes the SEC’s ongoing lawsuit against Ripple Labs, which began in December 2020 over the sale of XRP as an unregistered security. Ripple maintains XRP is not a security, and that litigation remains unresolved. The Coinbase lawsuit notes that the SEC has not clearly defined which cryptocurrencies are securities, creating confusion for exchanges and investors alike.
Industry Impact and Outlook
This lawsuit underscores the regulatory uncertainty surrounding cryptocurrencies in the U.S. While Coinbase has positioned itself as a compliant platform, the allegations could set a precedent for how courts view crypto tokens under securities law. If the court rules against Coinbase, it could force the exchange to delist many tokens or register as a securities exchange, fundamentally altering the crypto trading landscape. Coinbase has not yet publicly responded to the lawsuit, but the case is expected to attract close attention from regulators and market participants.