Securities Regulation Daily Wrap Up, BLOCKCHAIN—S.D.N.Y.: Court eviscerates action alleging that Coinbase acted as exchange and broker-dealer in digital asset trades, (Jul 30, 2026)

By Lene Powell, J.D.

The court’s analysis turned on whether Coinbase took title of tokens and acted as a principal in transactions.

Gutting the vast majority of a private action against Coinbase, a federal district court ruled that Coinbase was not a statutory seller under the Securities Act or state blue sky laws regarding matched transactions, representing 99.7 percent of transactions in the digital asset tokens at issue. However, the court found that Coinbase was a statutory seller for “inventory” transactions, representing the remaining.03 percent of Coinbase trades involving the tokens (Underwood v. Coinbase Global, Inc., No. 1:21-cv-08353-PAE (S.D.N.Y. July 30, 2026)).

The court’s grant of summary judgment cuts to the heart out of the action, which alleges that Coinbase lists and sells digital assets that qualify as “securities” without registering with the SEC as a securities exchange or broker-dealer.

The court held off on deciding whether the tokens in the inventory transactions are “securities,” leaving that for the next phase of the drastically trimmed litigation.

Alleged failure to register. In the original complaint, the plaintiffs claimed that Coinbase operated as an unregistered securities exchange and unregistered brokers under the Exchange Act and California and Florida law. The plaintiffs subsequently amended the complaint to include Securities Act claims. The complaint seeks monetary damages, contract rescission, and other remedies.

The court dismissed the action in 2023, finding that Coinbase was not a statutory seller of the tokens at issue. The Second Circuit subsequently reversed the dismissal of the Securities Act claims, though it affirmed the dismissal of Exchange Act claims.

In a 2025 order on remand, the court preliminarily found that the plaintiffs adequately pleaded that Coinbase acted as a statutory seller of crypto tokens. However, the court ordered discovery on the issue, noting that it was segregable and had the capacity to resolve the case.

Not a statutory seller in matched transactions. In the latest order, the court found that Coinbase was not a statutory seller under Sections 5(a) and (c) and 12(a)(1) of the Securities Act and state blue sky laws, in transactions in which Coinbase matches users’ buy and sell orders. Matched transactions constitute almost all transactions on Coinbase’s platform.

The court found that Coinbase was not a statutory seller under either of two scenarios in Pinter v. Dahl. First, the court found that Coinbase did not pass title in the tokens to buyers. Here, the court found that Coinbase never took title, so could not have passed it to buyers. Neither the user agreement nor Coinbase’s custody or operational control conferred title on Coinbase. The company did not record users’ assets as its own in its financial accounting. Further, the spreads and fees Coinbase earned on trades reflect compensation typical for trade-execution services.

The court compared Coinbase to the Depository Trust and Clearing Corporation (DTCC), which records ownership interests but does not itself take title. The court also likened Coinbase to NYSE and traditional equities markets.

Further, the court cited Risley v. Universal Navigation Inc., in which the Second Circuit held that the plaintiffs had not adequately pled that a decentralized digital asset exchange was a statutory seller under either Pinter prong.

In the second prong of Pinter, the court found that Coinbase did not solicit token purchases by the plaintiffs. Coinbase merely provided basic information about the tokens like descriptions and pricing information and other data, but this did not cause the plaintiffs to buy the tokens. And even if it did, it did not extend beyond the “collateral” participation in sales that Pinter excluded from Section 12 liability.

The court discounted Coinbase promotional activities including “sweepstakes” programs for specific tokens, a “Learn/Earn” program that let token issuers provide digital assets to customers in exchange for a service fee to Coinbase, and “staking” of tokens for rewards.

The court determined that the Securities Act analysis also applied to the California and Florida state law claims.

Statutory seller in inventory transactions. However, the court did find that Coinbase was a statutory seller in the second category of transactions, consisting of Coinbase Simple orders that the company filled from its own corporate inventory of tokens.

The court found that in contrast to its agent role with respect to matched transactions, Coinbase acted as the principal in inventory transactions. The court found that Coinbase did not qualify for Section 4(a)(1)’s ordinary trading exemption. None of Coinbase’s counterarguments that it was not a “dealer” were persuasive.

This is case No. 1:21-cv-08353-PAE.

Judge: Englemayer, P.

Attorneys: Steven L. Bloch (Silver Golub & Teitell LLP) for Zeneyda Patin. Jay B. Kasner (Skadden, Arps, Slate, Meagher & Flom LLP) for Coinbase Global, Inc.

Companies: Coinbase Global, Inc.

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