Coinbase Lawsuit Moves Forward As Judge Rejects “statutory Seller” Defense

A U.S. federal judge ruled that Coinbase must face an investor lawsuit in New York, rejecting the exchange’s argument that it does not qualify as a “statutory seller” under federal law.

The decision means Coinbase will have to defend itself against allegations that it sold unregistered securities.

According to a report by Reuters, U.S. District Judge Paul Engelmayer determined that Coinbase transacted directly with its customers, suggesting that it was acting as a seller. The lawsuit alleges that Coinbase offered and sold 79 cryptocurrencies classified as securities without registering as a broker-dealer.

The case, originally dismissed in February 2023 by the District Court of Southern New York, was later revived by the Circuit Court of Appeals. However, the latter’s Third Circuit partially granted Coinbase’s petition in its case against the SEC, ruling that the regulator’s denial of a request for rulemaking on digital assets was “arbitrary and capricious.”

The SEC initially denied the request in 2023, prompting Coinbase to appeal. Judge Thomas Ambro criticized the SEC’s rationale as insufficiently reasoned, while Judge Stephanos Bibas highlighted in a concurring opinion the need for regulatory clarity, stating:

A Coinbase spokesperson responded to the ruling, stating:

“Coinbase does not list, offer, or sell securities on its exchange. Today’s opinion importantly narrowed the scope of discovery in this case, which is significant. We look forward to vindicating the remaining claims in the district court.”

Ongoing legal battle with the SEC

Coinbase remains embroiled in a separate lawsuit with the U.S. Securities and Exchange Commission (SEC), which accused the exchange in June 2023 of operating an unregistered securities platform and failing to register as a broker.

In January 2025, Coinbase petitioned a U.S. appeals court to rule that cryptocurrency transactions should not be classified as securities trades, arguing they are merely asset sales.

Beyond its legal battle with the SEC, Coinbase also sued the Federal Deposit Insurance Corporation (FDIC), accusing it of attempting to “cut off digital-asset firms from essential banking services.” The exchange alleged that both the SEC and FDIC failed to comply with Freedom of Information Act (FOIA) requests.

As the largest U.S. cryptocurrency exchange by trading volume, Coinbase plays a major role in the market and serves as the primary custodian for the recently approved spot Bitcoin ETFs.