• Southern District Of New York Narrows Claims On Summary Judgment In Putative Class Action Against Digital Asset Exchange

  08/04/2026

  On July 30, 2026, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York granted in part and denied in part cross-motions for summary judgment in a putative class action asserting claims against a digital asset exchange, its parent company, and its CEO under Sections 12(a)(1) and 15 of the Securities Act of 1933 (the “Securities Act”) and analogous provisions of state “blue sky” laws.  Underwood v. Coinbase Global, Inc., No. 21 CIV. 8353 (PAE), 2026 WL 2198774, at *1 (S.D.N.Y. July 30, 2026).  The Court granted defendants’ motion for summary judgment as to all claims based on “matched” transactions—in which the exchange’s automated matching engine paired users’ buy and sell orders for digital asset tokens, and which accounted for approximately 99.97% of trading volume in the tokens at issue—finding that the exchange was not a statutory seller under either scenario articulated in the U.S. Supreme Court’s seminal decision in Pinter v. Dahl, 486 U.S. 622 (1988).  However, as to “inventory” transactions—in which the exchange filled user orders from its own corporate-owned token holdings, comprising the remaining approximately 0.03% of that volume—the Court granted plaintiffs’ motion for summary judgment on the statutory seller element, finding that the exchange was a statutory seller for such transactions and that no federal or state exemption applied.

  Plaintiffs are retail users who transacted in 60 digital asset tokens on the exchange’s trading platforms.  For purposes of these cross-motions, the parties stipulated to certain facts through September 30, 2024, the close of fact discovery.  Id. at *3 n.6.  Plaintiffs alleged that the tokens constituted securities that the exchange sold without registering with the SEC as either a securities exchange or broker-dealer.  These cross-motions followed the Court’s decision to bifurcate discovery and address summary judgment motions directed to the threshold statutory seller question first, while deferring other issues.  Id. at *8–9.

  “Matched” transactions represented approximately 99.97% of the exchange’s overall trading volume in the 60 tokens at issue.  Id. at *11.  It was undisputed that, as to these transactions, the exchange kept custody of users’ tokens, matched buy and sell orders through an automated, near-instantaneous process, and recorded the trades on an internal ledger.  Id.  As to these transactions, the Court found no genuine dispute of material fact that the exchange did not operate as a statutory seller.

  The Court first held that the exchange did not constitute a statutory seller under the first scenario of Pinter, which applies where an entity “passed title, or other interest in the security, to the buyer for value.”  Id. at *12.  The Court highlighted that every iteration of the exchange’s user agreement unequivocally provided that “[t]itle to Digital Currency shall at all times remain with you and shall not transfer to [the exchange],” and that the exchange “does not represent or treat assets in User’s Digital Currency Wallets as belonging to [the exchange].”  Id. at *13–14.  Reading those terms together with neighboring provisions that expressly decoupled custody and control from ownership, the Court held that these provisions were “decisive” that the exchange had not “passed title, or other interest in the security, to the buyer for value,” and it rejected plaintiffs’ selective reading of the agreements to the contrary.  Id. at *14, *23.  The Court also held that the exchange’s operational roles—holding users’ tokens in omnibus wallets, maintaining an internal ledger recording ownership, matching orders through an automated trading engine, and charging transaction-based fees—closely paralleled the functions of intermediaries in traditional securities markets, such as the DTCC and stock exchanges, which do not acquire ownership interests in the securities they process.  Id. at *15–16.

  The Court also rejected plaintiffs’ arguments that certain letters the exchange wrote to the SEC—which, according to plaintiffs, indicated that the exchange promised to deliver digital assets to users and diagrammed how tokens were traded on the platform—established that the exchange was a statutory seller.  The Court concluded that plaintiffs’ quotations from the letters were “quite misleading” and omitted, for example, references that treating the exchange as making “a promise to deliver Digital Assets to the User” “would not . . . be an accurate representation of the [c]ompany’s business.”  Id. at *19–20.  The Court also rejected plaintiffs’ arguments that the exchange’s pricing discretion over spreads and fees, its minimal financial risk exposure in processing matched orders on its simplified retail platform, its pre-February 2021 “batching” of orders into a single net trade, and its use of an operational clearing account created genuine factual disputes as to whether the exchange ever owned any of the tokens that were traded in matched transactions, holding that none of these facts suggested that the exchange ever gained title to the underlying tokens or became the principal seller of these tokens.  Id. at *20–22.

  As to the second scenario of the statutory seller analysis under Pinter—whether the exchange “successfully solicited” plaintiffs’ purchases—the Court found that no lead plaintiff purchased tokens because of information the exchange provided.  Id. at *24–26.  Both lead plaintiffs testified to relying overwhelmingly on external sources—including Twitter/X, YouTube, cryptocurrency influencers, websites devoted to covering cryptocurrencies, and news outlets—to make purchase decisions.  Id. at *25–26.  While both plaintiffs considered pricing information and descriptions of tokens available on the exchange, the Court held that publishing this type of basic information constitutes collateral activity relative to the transaction in the tokens and, in any event, their testimony established that this information did not induce them to make purchases.  Id. at *26.  The Court further held that the exchange’s promotional programs—which included sweepstakes for particular tokens, programs under which users received a nominal amount of an issuer’s token for completing tasks such as watching videos about it, and staking rewards (where users would obtain rewards that the exchange passed along to them from token issuers)—did not create a material factual dispute because neither plaintiff relied on any of those programs in making purchase decisions, although the Court also noted it believed the exchange had made a “substantial” argument that these programs did not constitute solicitation but rather the type of marketing effort that does not render an entity a statutory seller.  Id. at *27–28.

  The Court explained that plaintiffs’ state law claims tied to these matched transactions were also not actionable: plaintiffs’ unregistered-securities claims under California, Florida, and New Jersey law rose and fell with their Section 12(a)(1) claims, and the state broker-dealer claims each required privity between the defendant and the buyer, which was absent here because the exchange never held title to tokens in matched transactions.  Id. at *28–29.  The control-person claims against the parent company and the CEO premised on matched transactions likewise failed, because plaintiffs could not establish a primary violation of Section 12.  Id. at *29.

  With respect to “inventory” transactions, however, the exchange did not dispute that it held title in the tokens and passed title to buyers, which would satisfy the first Pinter scenario.  Id. at *30.  The exchange argued instead that the “ordinary trading” exemption under Section 4(a)(1) of the Securities Act should apply, which excludes from Section 12(a)(1) liability transactions by any person other than an “issuer, underwriter, or dealer.”  Id.  While the parties agreed that the exchange was not an “issuer,” id. at *32, the Court found that the exchange qualified as both a “dealer” and an “underwriter,” and that the exemption therefore did not apply.  The Court did not address or consider the exchange’s registration status or obligations under any regulatory regime.

  The Court further held that the exchange met the statutory definition of a dealer.  Id. at *32–33.  The Court rejected defendants’ argument that the small percentage of inventory transactions versus matched transactions indicated that the exchange was not a dealer, as the Court explained that the gross volume of tokens transacted demonstrated that the exchange engaged for at least “part of its time” as a principal selling or otherwise trading in securities.  Id. at *33.  While the exchange also argued that it did not engage in these transactions for the purpose of turning a profit, the Court held that the exchange’s primary motivation for filling orders from inventory was to keep its user base satisfied, and thereby to profit from greater trading volume, on which it earned fees.  Id. at *34–35.

  As to the exchange’s status as an “underwriter,” the Court found that the exchange purchased tokens from issuers “with a view to” their distribution to exchange users—not for investment purposes—and that this rendered the exchange a statutory underwriter.  Id. at *36.  The Court pointed to the exchange’s letters to the SEC, an internal presentation, and a corporate policy, all of which confirmed that inventory tokens were held for operational purposes and were “not held for the speculative intention of profiting through trading.”  Id. at *35–36.  While the exchange contended that these tokens were purchased only to accommodate user transactions and not to profit directly, the Court explained that a profit motive was not necessary to render an entity a statutory underwriter, and that the exchange did in any event profit indirectly through increased trading volume that resulted in increased revenue.  Id. at *36–37. 

  For similar reasons, the Court also granted summary judgment with respect to plaintiffs’ claims under state-law analogues to the Securities Act, concluding that defendants were statutory sellers under the California, Florida, and New Jersey blue sky laws, and that no state-law exemption applied.  Id. at *37–39.

  Category: Statutory Seller
  

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• UNDERWOOD V. COINBASE