Another blow to the cryptocurrency sector? US crypto exchanges likely to face class action lawsuit

The US war on cryptocurrencies is intensifying, and according to reports, cryptocurrency exchanges could be the next to face the wrath of regulators.

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Class action lawsuit against US cryptocurrency exchanges is coming

According to news Fox Business reported on March 9 that the next move in U.S. regulators’ war on cryptocurrencies could be a massive class-action lawsuit filed on behalf of retail investors against top exchanges. The outlet reported that leading securities lawyer Tom Grady is preparing for potential lawsuits against the largest U.S. crypto companies, including Coinbase, Robinhood, and Kraken.

The charge is the same old story that the Securities and Exchange Commission keeps repeating – illegal sale of unregistered securities. In the report, Grady said he had launched an investigation into the exchanges' operations and their potential violations of state and federal securities laws through digital coin transactions, the vast majority of which the SEC considers to be unregistered securities and therefore operate in violation of federal law, adding:

“We believe that Coinbase, Robinhood, and other exchanges violated the law, and investors who lost money by purchasing cryptocurrencies on their platforms may be entitled to compensation for those losses.”

Additionally, the lawyer is looking for clients of Coinbase and other exchanges who have suffered losses from their crypto investments.

Cryptocurrencies have not yet been classified

The debate over how digital assets are classified has roiled the crypto industry since the SEC began using enforcement measures against various crypto companies in 2017 for offering unregistered securities.

Industry executives and experts have faced strong resistance to many views on extrajudicial intervention by the SEC. U.S. lawmakers have been slow to come up with a regulatory framework, leaving no agency with full jurisdiction over the asset class.

Crypto lawyer John Deaton commented on this news by saying:

“This is another example of the excessive litigation that is being generated and fueled by the lack of regulatory clarity in the United States regarding digital assets.”

He added that when there is regulatory uncertainty coupled with regulators’ anti-crypto campaign, “it creates a hotbed of litigation.”

“We will continue to see litigation chaos in the United States, which will further encourage innovation abroad,” the lawyer concluded.

The cryptocurrency sector has not been the subject of many class action lawsuits because most retail investors believe that digital assets do not constitute securities, but rather currencies like the dollar. However, Grady's potential lawsuit could open the door for more lawsuits against crypto firms.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.