Coinbase has been cleared of crypto transactions.

Coinbase, one of the leading cryptocurrency exchanges, has won a significant victory in the ongoing lawsuit. The US Court of Appeals for the Second Circuit ruled in favor of Coinbase, confirming that the secondary sale of cryptocurrencies on the platform does not violate the Securities Exchange Act.

The court's ruling will affect people trading tokens on Coinbase nationwide from October 8, 2019 to March 11, 2022. At the heart of the dispute was whether Coinbase's traded cryptocurrencies met security standards.

Sections 5, 12(a)(1) and 15 of the Securities Act of 1933, along with Sections 5, 15(a)(1), 20(a), and 29(b), present federal claims. In the year The Securities Exchange Act of 1934 provides state law claims related to securities laws in California, Florida and New Jersey.

The plaintiffs argued that Coinbase's actions were to offer and sell unregistered securities. They also alleged various violations of securities laws.

However, Coinbase argued that the secondary crypto-asset sale did not meet the criteria for a securities transaction. The appellate court examined various issues and eventually overturned some lower court decisions and upheld others.

The court determined Coinbase's potential liability under Section 12(a)(1) of the Securities Act for selling unregistered securities. However, it dismissed plaintiffs' Securities Exchange Act claims, citing insufficient evidence of transaction-specific contracts required for rescission under Section 29.

Related: Coinbase secures limited distributor license in Canada

The court's decision hinged heavily on interpreting Coinbase's User Agreements, which have evolved over time. Language in different versions complicates the subject matter and privacy issues. Clarity is emphasized in the applicable version of the User Agreement, where disputes preclude open resolution.

The plaintiffs see the ruling as a step forward in holding crypto platforms accountable under securities laws, supporting investor protection in the growing crypto space. Conversely, Coinbase's decision reinforces its position that secondary crypto sales are not securities transactions.

Coinbase also emphasized the importance of regulatory transparency to foster innovation in the industry. The Court of Appeals ruling has significant implications for regulating cryptocurrencies and digital assets.

Moreover, Coinbase CLO Paul Grewal expressed his gratitude to the X social platform, the Second Circuit reaffirmed the importance of contracts by stating that there is no personal liability for the secondary trading of digital assets on exchanges like Coinbase under the federal securities law.

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