A federal judge in Manhattan on Thursday dismissed most of a long-running lawsuit in which customers accused the largest U.S. crypto exchange of unlawfully selling securities without registering as an exchange or broker-dealer.
The complaint targeted trading in more than 60 tokens, including XRP and dogecoin, and sought unspecified damages on behalf of a putative class. U.S. District Judge Paul Engelmayer threw out claims tied to so-called "matched" transactions - trades in which Coinbase paired a customer's buy order with another customer's sell order.
According to the court, matched transactions represented an estimated 99.97% of trading volume in the tokens at issue, equivalent to hundreds of billions of dollars. Engelmayer concluded that Coinbase was not a statutory seller under the federal Securities Act of 1933 for those matched trades because the exchange did not pass ownership of tokens to buyers, and it did not "induce," or solicit, the transactions merely by offering token overviews and price history information.
By contrast, the judge permitted claims related to "inventory" transactions to proceed. Inventory transactions occur when Coinbase fills customer orders using tokens that it holds; Engelmayer found the exchange acted as a dealer and underwriter in those instances and did pass title to buyers. Inventory sales accounted for the remaining 0.03% of trading volume cited in the complaint, representing at least $178 million in sales according to the court's figures.
The litigation dates back to 2021. Engelmayer previously dismissed other federal securities law claims in 2023.
Coinbase's chief legal officer posted on X that the company "will continue to vigorously defend the remaining 0.03% - count on that." Representatives for the customers did not immediately provide comment.
The case turned on whether Coinbase qualified as a statutory seller under federal and state securities regimes designed to prevent fraudulent sales. The judge's ruling distinguished the different legal character of matched versus inventory transactions based on whether ownership of tokens transferred and on the exchange's role in the transaction.
The decision comes amid a changing regulatory landscape for cryptocurrency firms. The article notes that, like other participants in the industry, Coinbase has experienced a rollback of regulatory oversight under the second Trump administration. Separately, the U.S. Securities and Exchange Commission last year dropped a 2023 lawsuit it had brought alleging Coinbase allowed trading in tokens that should have been registered as securities.
The court's narrowing of the case removes potential liability tied to the vast majority of the trading volume challenged by customers, but it preserves a discrete window of exposure linked to the exchange's own token holdings. The remaining claims now focus on whether Coinbase's inventory sales meet the statutory definitions that trigger securities law liability.