A class action lawsuit against Coinbase alleges that the exchange made some unregistered securities sales with plaintiffs saying 79 tokens meet the definition of securities but they were not warned of the risks so let’s read more today in our latest Coinbase news.

Three individuals that purchased crypto via Coinbase filed a lawsuit against Coinbase in the Southern District Court of New York alleging that the exchange is operating as an unregistered securities exchange. The lawsuit listed 79 tokens that it claims are securities and Coinbase selling them is violating the state and federal law so the buyers were not actually warned about the risks involved in their purchases.

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The plaintiffs Christopher Underwood, Louis Oberlander, and Henry Rodriguez filed the amended complaint naming Coinbase Global and the CEO Brian Armstrong as defendants. The document argues for each token in question that it qualifies as a security under the Howey test as an investment of money in a common enterprise with an expectation of profits to be derived from the efforts of others. The suit also said that Coinbase is the seller when exchange takes place and crediting as well as debiting parties involved in the transaction in the accounts rather than facilitating direct exchange between the parties.

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Philip Moustakis who is the counsel at Seward and Kissel said:

“The case is not much of a surprise. After all, the SEC has signaled that it intends to pursue investigations or actions against crypto-exchanges.”

Similar cases arose after the SEC started cracking down on initial coin offerings in 2018, Moustakis explained but while the SEC pursued the cases against token issuers, such as its current dispute with ripple, the agency hasn’t taken action against the platform yet. Moustakis said the examination of the tokens exemplifies the need for bigger regulatory clarity:

 “Unless and until the SEC provides further guidance and a path to compliance for token issuers, crypto lending products, exchanges, and other market participants, the question of whether any particular cryptoasset or transaction is a security will be litigated one at a time.”

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He continued:

“While the tests to determine whether a token is a security […] are well established, the analysis depends on facts and circumstances and different evaluators weigh certain factors more than others, so it can yield different outcomes depending on one’s point of view.”

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Source: https://www.dcforecasts.com/coinbase-news/lawsuit-against-coinbase-alleges-unregulated-securities-sales/