Coinbase Asks Court to Toss Crypto Token Lawsuit

A court case could decide whether digital tokens are more similar to stocks or gold, The Wall Street Journal (WSJ) wrote Thursday (May 26).

Coinbase attorneys filed a motion recently to dismiss a class-action lawsuit arguing that 79 tokens listed on the platform are actually unregistered securities. This class is looking for reimbursement for trading fees and market losses, and to prevent the assets from trading on the platform.

The assets in question include four of the 10 largest cryptocurrencies, XRP, Cardano, Solana and Dogecoin, the report said.

This comes as the Securities and Exchange Commission hasn’t yet said what cryptocurrency it considers to be securities.

However, federal statutes from the 1930s make it so investors can be deputized to sue sellers to get their money back — and the loss of $1.5 trillion from crypto markets in recent months might be the time to test that out, the report said.

In addition, there are also more lawsuits related to crypto, with investors filing eight class-action lawsuits in 2022 so far in that arena, up from 11 in all of 2021, research from Stanford University and Cornerstone Research said.

Crypto platforms have argued that the tokens they list in the U.S. are commodities in the mode of gold, without a full-time federal regulator.

The question of how to define crypto legally and regulating it has been a sticky one for some time now.

See also: SEC’s Setback in Ripple Suit Adds Pressure to Define Crypto Assets

PYMNTS wrote that a judge has recently denied a motion by the SEC which would clarify the content of some emails about the classification of digital assets for the upcoming Ripple Labs trial.

The report said that while this might seem trivial, it could involve wider implications.

The SEC has used almost exclusively enforcement powers against token issuers, trying to get them to register digital assets as securities. The SEC makes use of the Howey test, defining what an investment contract is to argue that many digital assets fall under its supervision.