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Underwood v. Coinbase Global Inc.

Court Dismisses Federal Securities Claims Against Online Digital Trading Platform

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OPINION & ORDER This decision resolves a motion to dismiss a putative class action brought under the federal securities laws against defendants Coinbase Global, Inc., Coinbase, Inc., and Brian Armstrong (“Armstrong”) (collectively with Coinbase Global, Inc., and Coinbase, Inc., “Coinbase” or “defendants”). Coinbase operates two online digital trading platforms on which users can transact in the cryptoeconomy. The Amended Complaint (“AC”), Dkt. 43, alleges that among the assets that Coinbase enables customers to buy and sell on these platforms are ones qualifying as securities. It alleges that these include 79 digital assets known as the “Tokens.” It alleges that, notwithstanding Coinbase’s practice of transacting in these securities with plaintiffs and other users, Coinbase is not registered with the U.S. Securities and Exchange Commission (“SEC”) as an exchange or broker-dealer. On this basis, lead plaintiffs here — each of whom transacted in the Tokens on the Coinbase platform — bring three sets of claims: (1) under Section 12(a)(1) of the Securities Act of 1933 (the “Securities Act”), for damages arising from Coinbase’s sale or solicitation of unregistered securities, AC

931-41; (2) under Section 29(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), arising from illegal contracts Coinbase entered into with its users to purchase and sell securities in violation of the Exchange Act’s registration requirements, id.

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