Coinbase and its CEO, Brian Armstrong, are facing a fresh class-action lawsuit alleging deception in the sale of securities and raising concerns about the legality of the company’s operations.

Filed by plaintiffs from Florida and California, the lawsuit has been lodged in the United States District Court for the Northern District of California San Francisco Division. The plaintiffs argue that Coinbase has deliberately disregarded state securities laws since its inception by offering digital assets for sale.

They assert that tokens such as SOLANA’s SOL, POLYGON’s MATIC, NEAR PROTOCOL’s NEAR, DECENATLAND’s MANA, UNISWAP’s $UNI, ALGORAND’s ALGO, TEZOS’s XTZ, and STELLAR LUMENS’ XLM are all considered securities.

The plaintiffs point out that Coinbase itself identifies as a “Securities Broker” in its user agreement. They also claim that the digital asset securities sold on the platform should be considered as investment contracts or other securities. They further argue that Coinbase Prime brokerage qualifies as a securities broker. If successful, the plaintiffs seek full rescission, statutory damages under state law, and injunctive relief through a jury trial. This lawsuit mirrors another class-action suit that raised concerns about consumer harm through securities sales.

Coinbase has refuted these allegations, asserting that secondary cryptocurrency asset sales did not meet the standard criteria for securities transactions and contesting the applicability of securities regulations. However, this lawsuit differs from the ongoing legal dispute Coinbase is facing with the U.S. Securities and Exchange Commission, which also questions the classification of tokens sold on Coinbase as securities.

In response to a judge's decision allowing this case to proceed, Coinbase filed an interlocutory appeal. John Deaton, a cryptocurrency lawyer campaigning against Senator Elizabeth Warren, has filed an amicus brief supporting the motion for interlocutory appeal on behalf of 4,701 Coinbase customers.

Despite these legal challenges, Coinbase reported strong performance for the first quarter of 2024, boosted by market growth and the introduction of spot Bitcoin exchange-traded funds. The platform recorded $1.6 billion in total revenue and $1.2 billion in net income for the quarter, resulting in $1 billion in adjusted earnings before interest, taxes, depreciation, and amortization.