Coinbase, a leading cryptocurrency exchange, and its CEO Brian Armstrong are facing a new class-action lawsuit alleging that the company deceived investors into buying securities and operated an illegal business model. The lawsuit, filed in the United States District Court for the Northern District of California, represents six plaintiffs from California and Florida who claim that Coinbase's digital asset sales violated state securities laws since its inception.

The lawsuit alleges that Coinbase knowingly sold securities, including tokens such as Solana (SOL), Polygon (MATIC), Near Protocol (NEAR), Decentraland (MANA), Algorand (ALGO), Uniswap (UNI), Tezos (XTZ), and Stellar Lumens (XLM), without proper registration or exemption. The plaintiffs claim that Coinbase's user agreement admits to being a "Securities Broker," making the digital assets sold on the exchange investment contracts or securities.

The lawsuit seeks full rescission, statutory damages under state law, and injunctive relief through a jury trial. This new lawsuit is distinct from Coinbase's ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), which also questions whether tokens sold on Coinbase should be classified as securities.

Coinbase has argued that secondary crypto asset sales did not meet securities transaction criteria and disputed the relevance of securities regulations. However, the plaintiffs claim that Coinbase's business model is illegal and has caused harm to investors.

The exchange has recently filed an interlocutory appeal in response to a judge's decision allowing the case to proceed. Meanwhile, a crypto lawyer, John Deaton, has filed an amicus brief in support of Coinbase's motion for interlocutory appeal on behalf of 4,701 Coinbase customers.

The outcome of this lawsuit could have significant implications for Coinbase and the broader cryptocurrency industry, as it raises questions about the legal status of digital assets and the responsibilities of cryptocurrency exchanges. As the regulatory landscape continues to evolve, cryptocurrency exchanges must navigate complex legal issues to ensure compliance and protect their users.