A federal judge ruled that Coinbase (COIN) must face a lawsuit from customers who claim that the cryptocurrency exchange illegally sold securities without registering as a broker-dealer. The lawsuit alleges that Coinbase acted as a direct seller of 79 tokens traded on its platform despite not passing title to the tokens.
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U.S. District Judge Paul Engelmayer rejected Coinbase’s argument that it didn’t qualify as a “statutory seller” under federal securities law. The judge also refused to dismiss claims under California, Florida, and New Jersey laws by saying customers adequately alleged that Coinbase was a direct seller of the tokens. Unsurprisingly, Coinbase has maintained that it does not list, offer, or sell securities on its exchange.
However, this lawsuit is just one of several challenges facing Coinbase. In fact, the U.S. Securities and Exchange Commission is also suing the firm and claims that it illegally permitted trading of unregistered securities. Nevertheless, another federal judge recently put that case on hold to allow Coinbase to appeal to the 2nd Circuit to determine whether digital token trades are investment contracts that need to be regulated as securities.
Is COIN Stock a Buy, Sell, or Hold?
Overall, analysts have a Moderate Buy consensus rating on COIN stock based on six Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. However, after a 107% rally in its share price over the past year, the average COIN price target of $327.15 per share implies 19.2% upside potential.
