Shares of cryptocurrency exchange Coinbase (COIN) rose 24% in a single trading session after a federal judge dismissed a class-action lawsuit against the company.
Legal experts are calling the judge’s decision a rare legal victory for a crypto company.
Plaintiffs in the case claimed that Coinbase owned the crypto assets that it later directly sold to end users and that Coinbase’s ownership meant it “held title” over the digital tokens.
However, U.S. District Court Judge Paul Engelmayer pointed to Coinbase’s user agreement, which said that its customers are neither buying nor selling digital currency from the exchange and that “at all times” the title to a user’s currency remained with the user.
The judge subsequently dismissed the lawsuit with prejudice, meaning that the plaintiffs cannot refile the same lawsuit again.
The plaintiffs had also claimed that Coinbase’s marketing showed an effort to solicit a sale of securities. Engelmayer dismissed that argument too.
The legal victory sent Coinbase’s stock soaring nearly 25% on February 2. Despite the one-day gain, Coinbase’s share price remains down 55% over the last year and trading at $81.46 U.S.
Coinbase’s legal victory comes as U.S. Securities and Exchange (SEC) Commissioner Gary Gensler aggressively pursues efforts to regulate the crypto sector following the bankruptcy last fall of the FTX exchange.
Earlier this year, Gensler announced a joint enforcement action against cryptocurrency exchange Gemini and the now-bankrupt crypto lender Genesis.
Despite the SEC’s efforts at enforcement and the collapse of several high-profile crypto lenders and exchanges over the past year, digital coins and tokens are rallying to start 2023.
So far this year, the price of Bitcoin (BTC), the biggest crypto by market capitalization, has gained 42% to reach $23,500 U.S.
