Cointelegraph reported that a class-action lawsuit against Coinbase, Coinbase Global and CEO Brian Armstrong, accusing them of selling unregistered securities, was dismissed on Feb. 1 by the U.S. District Court of Southern New York. The lawsuit, filed on March 11, claimed that 79 of the tokens listed on Coinbase were securities and were being sold without proper registration, putting customers at risk without warning.

The charges were brought under the Securities Act of 1933 and the Exchange Act of 1934, using the Howey test to identify the tokens as securities. The plaintiffs argued for each token individually, but Judge Paul Engelmayer noted in his decision that the Howey claim would be a central issue if the case went to summary judgment.

The judge assumed that the tokens are securities for the purpose of his analysis but did not further consider the Howey claims. He declared that the Coinbase user agreement contradicts the plaintiffs’ claim that Coinbase was the “actual seller” of the tokens, and also stated that Coinbase did not solicit sales in a strict legal sense, leading to the dismissal of the claims under the Securities Act.

The judge also dismissed the claim under the Exchange Act, which alleged a contract involving a prohibited transaction, by stating that only the user agreement was subject to that claim, and it “did not necessitate illegal acts.” The judge referenced case law in his analysis.

The plaintiffs’ representatives seem to have recognized a flaw in their argument after the lawsuit was first filed. The amended complaint, filed on March 11, did not mention the user agreement but did not influence the judge’s analysis.

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