Aaron J. Wiltse

Coinbase recently won a significant summary judgment victory in a lawsuit alleging that the trades in 60 cryptocurrency tokens listed on its platform constituted sales of unregistered securities by Coinbase. With respect to the vast majority of trades—buy offers filled by tokens from the sell offers of other platform users—the court held that Coinbase does not qualify as a “seller” under the Securities Act.

By contrast, Coinbase was deemed a seller with respect to the very few buy orders it fills with its own tokens, though the court has yet to rule on all issues, including whether the tokens are securities in the first instance. The court’s decision is noteworthy for providing a detailed roadmap for analyzing when a crypto platform’s contracts and trading mechanics make it a seller under the Securities Act.

I. “Statutory Sellers” Under the Securities Act

Section 5 of the Securities Act of 1933 prohibits the offer or sale of unregistered securities unless certain exemptions apply. 15 U.S.C. §77e(a), (c). Section 12(a)(1) provides a private right of action to any person who purchased an unregistered security to sue the “seller” for rescission or damages, and it is a strict-liability provision that does not require scienter or negligence.

The Supreme Court in Pinter v. Dahl, 486 U.S. 622 (1988), articulated two prongs under which someone may be a so-called “statutory seller” for purposes of a Section 5 claim. Under the first prong, a defendant is a statutory seller if it “passed title, or other interest in the security, to the buyer for value.” Under the second prong, a defendant qualifies if it “successfully solicit[ed] the purchase [of a security], motivated at least in part by a desire to serve [its] own financial interests or those of the [security’s] owner.”

II. The Summary Judgment Decision

In Underwood v. Coinbase Glob., Inc., 2026 WL 2198774 (S.D.N.Y. July 30, 2026), Coinbase traders brought a class action against Coinbase under the Securities Act and analogous state laws alleging that Coinbase sold or solicited unregistered securities.

After the Second Circuit reversed in part the district court’s 12(b)(6) dismissal, the district court bifurcated discovery to focus solely on the threshold statutory-seller question.

On summary judgment, the court ruled that Coinbase was not a statutory seller with respect to so-called “matched” customer trades (which accounted for 99.97% of trading volume in the sixty tokens at issue during the relevant time period), but that it was a statutory seller for the remaining “inventory” trades (the remaining 0.03%).

A. The Coinbase Trading Platform

During the relevant period, Coinbase trades were executed in one of two ways. In the vast majority of cases, the platform operated as a matchmaker, “matching” buyer orders placed by traders with seller orders placed by other traders through an automated matching engine.

In a small residual category, representing roughly 0.03 percent of the relevant trading volume (but over $178 million for U.S.-based users in absolute terms) Coinbase filled user orders directly with tokens that Coinbase itself owned.

B. Matched Transactions

Under the first Pinter prong, the key issue for the court was whether Coinbase “passed title” to token purchasers.

The court’s primary basis for granting summary judgment to Coinbase was its user agreements. The court pointed to key language like “Title to Digital Currency shall at all times remain with you and shall not transfer to Coinbase” and found that it was “difficult to imagine more conclusive language to the effect that title in tokens remained with users and did not pass to Coinbase.”

Although the court found that “these provisions are decisive,” it also analyzed Coinbase’s trading operations and found that they “dovetailed” with the terms of the user agreement.

For example, although Coinbase “maintained custody of its users’ assets, the tokens themselves remained in Coinbase’s omnibus wallets, and the trades were not recorded on tokens’ respective public blockchains,” Coinbase’s contemporaneous internal ledger “recorded whose tokens (or portions thereof) were owned by which customers,” a procedure the court observed was “only compatible with” token ownership by customers, not Coinbase.

The court also found further support in comparisons to features of “traditional securities-market intermediaries” that are not treated as statutory sellers.

Custodied assets. Coinbase held the relevant tokens in omnibus wallets to which Coinbase held the cryptographic keys, with the blockchain recording Coinbase, rather than the retail users, as the holder of the tokens. Coinbase transactions are mostly conducted “off chain” (rather than on a public blockchain), and Coinbase tracks these transactions through an internal ledger.

Plaintiffs argued this meant Coinbase “owned” the tokens, but the court disagreed, drawing a direct analogy to traditional securities-market intermediary arrangements under which, “the beneficial owner of a given security holds an account at a brokerage firm, which identifies the security as belonging to the owner—notwithstanding that the [Depository Trust and Clearing Corporation] identifies the broker as holder of the security.”

Although “Coinbase custodies its users’ tokens in omnibus wallets... which contain tokens registered on the blockchain under Coinbase’s name,” like the traditional intermediaries, the court found it significant that “Coinbase’s books and financial statements did not record the tokens as beneficially owned by it.”

Fee structure. The court found the comparison to the “fee structure used by intermediaries in connection with securities trading” to be “instructive.” Those intermediaries charge fees consisting of, for example, “clearance-activity fees, based on the value of transactions cleared” or “usage-tiered, per-item transaction fees.”

The court found Coinbase’s similar “fees undisputedly do not represent compensation for a sale by Coinbase” and, instead, “like the fees paid to traditional intermediaries, they were keyed to the matching and execution process.”

Trading platform. Finally, the court found that “Coinbase’s trading platform is also relevantly akin to traditional markets, such as the NYSE, in that, as to matched transactions, it provides a venue for buyers and sellers themselves to swap title.” Indeed, the plaintiffs’ own expert “likened Coinbase's ledgering process to that of a ‘commercial bank [that] maintains deposit accounts for its customers’ and ‘simply adjusts its internal ledger.’”

Under the second Pinter prong, the court found that Coinbase’s publication of token information pages, pricing data, and educational materials did not constitute “solicitation” of specific purchases.

First, the court held that the plaintiffs’ testimony “established that they relied on numerous sources of information that were far more in-depth than the basic overview that Coinbase provided of each token and its price history” and thus “the information that Coinbase provided regarding tokens did not induce plaintiffs to purchase them.”

Second, the court held that Coinbase’s publication of price information “based on real-time supply and demand, per the company’s order books” did not constitute solicitation, likening this to stock prices reported by exchanges or finance publications.

And the information Coinbase provided about particular tokens was merely “high-level and descriptive,” rather than solicitation to buy those tokens, and also carried disclaimers that the information was not a recommendation to buy.

C. Inventory Transactions

As for inventory transactions, Coinbase did not dispute that it was a statutory seller because it held title to tokens in its corporate inventory and transferred ownership of those tokens to buyers.

Instead, it argued that it qualified for the “ordinary trading” exemption, which excludes from such liability “transactions by any person other than an issuer, underwriter, or dealer.” 15 U.S.C. §77d(a)(1). No party contended that Coinbase was an issuer, but the court held that it was both a dealer and an underwriter with respect to the inventory trades.

Dealer. Under the Securities Act, a dealer is “any person who engages either for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person.” 15 U.S.C. §77b(a)(12). The court, rejecting all of Coinbase’s arguments, held that the “facts leave no doubt that Coinbase qualified as a dealer” with respect to the inventory transactions.

First, the court found unpersuasive the fact that inventory transactions constituted “a mere 0.03% of all relevant transactions.” The court held that the language about any person who engages “part of his time” in these activities is to be read broadly, and noted that even though the inventory trades made up only 0.03% of the overall volume, they still corresponded to $178.2 million in tokens.

Second, Coinbase argued that “it did not seek to profit from” the inventory trades, explaining that its motivation “was to keep its user base satisfied” by filling orders when the matching engine experienced “outages or extreme latency” or when “orders were below Coinbase’s minimum order amount for a particular token.”

The court reasoned that even if that was the case, “the record supports that Coinbase used corporate inventory to preserve execution quality, user goodwill, and trading volume—thus indirectly increasing Coinbase’s revenues.”

Underwriter. The Securities Act defines “underwriter” as “any person who has purchased from an issuer with a view to... the distribution of any security.” 15 U.S.C. §77b(a)(11). The court rejected Coinbase’s argument that it did not purchase tokens “with a view to distribute” them because it did not “primarily seek to profit directly from these inventory sales.”

Again citing the statute’s broad language, the court held that Coinbase acquired the tokens “with a view to distribute” them because it “plainly ‘intended to sell’ the tokens to buyers on the other side of these inventory transactions.”

III. Takeaways

Documentation Is the First, but Not the Only, Line of Defense. Coinbase’s clear, consistently maintained user-agreement language, which “powerfully support[ed] that [it] did not take ownership of those tokens,” was the starting point of the court’s analysis. Platforms should ensure that their terms of service unambiguously specify whether title transfers to the platform at any point during the transaction lifecycle.

But the court also reviewed the factual record and found that the transactions at issue aligned with the terms of the agreements, suggesting that platforms’ architecture must follow those provisions.

A platform that calls itself a “marketplace” or “exchange” may still face seller liability if particular transactions involve principal trading. Conversely, a platform involved in principal trading for a small fraction of volume is not thereby converted into a seller for all transactions.

Platforms can manage their exposure by ensuring all user trades are executed without the platform taking a principal position and maintaining clear custodial frameworks with robust internal ledger systems.

Even a Tiny Fraction of Principal Trading Can Matter. The “inventory” transactions constituted only 0.03 percent of Coinbase’s relevant volume, but the court did not find this dispositive under the statute, especially in light of the fact that this represented at least $178 million in token sales. Platforms that trade even a modest number of tokens for operational efficiency should understand that these trades may generate seller liability.

The Ordinary-Trading Exemption Is Narrow. The court’s rejection of the ordinary-trading exemption was in large part due to the broad definitions of “dealer” and “underwriter” under the statute.

Even if a platform is engaging in this activity for reasons not directly tied to turning a profit, the Underwood decision makes clear that courts are willing to consider indirect profit to the firm in analyzing this exemption.

IV. The Road Ahead

Underwood leaves the ultimate merits question for another day: whether any of the 60 tokens at issue is a security. Its ruling on seller status, however, has immediate consequences.

The decision makes clear that courts will look past a platform’s label and examine how each trade actually works by asking who owns the assets, who passes title, and whether the platform acts as an intermediary or as principal.

That transaction-by-transaction focus is likely to remain important as the SEC considers a tailored offering regime for certain investment contracts involving crypto assets. Regulatory classifications may change, but platform architecture will still matter.

For exchanges, Underwood’s lesson is straightforward: contracts help, but custody, code, and execution determine where marketplace activity ends and seller liability begins.

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This article first appeared in the August 12, 2026, edition of the “New York Law Journal” © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.