Just a week after Coinbase reported a jump in first-quarter revenue, the exchange found itself embroiled in a lawsuit. A group of six exchange users allege in a lawsuit that Coinbase, under its CEO Brian Armstrong, is violating state securities laws and misleading users by claiming that the exchange does not sell crypto tokens as securities. In the US, securities are assets that are invested in with the expectation of making a profit through the efforts of someone other than the investors.

The lawsuit against Coinbase was filed in the United States District Court for the Northern District of California, San Francisco Division. The document claims that Solana, Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos and Stellar are listed on the exchange as securities.

“Coinbase has been part of a shadowy crypto ecosystem operating just outside the law since it was established over 10 years ago. His entire business model is built on a lie and a dream: the lie is that “we don’t sell securities,” and the dream is that, knowing that he will eventually be caught in the lie, “it’s better to ask for forgiveness than permission “, the plaintiffs have said in their case.

In drafting its user agreement with investors and other customers, the lawsuit alleges, Coinbase specifically identified the crypto assets it was selling as “securities,” even though it never registered itself, its people, or the crypto securities it was selling. The document also highlights that Coinbase acknowledges in its user agreement that it is a “securities broker.”

Based on these allegations leveled against Coinbase, the plaintiffs are seeking injunctive relief through a lawsuit along with a full reversal, CoinTelegraph it says in its report. According to CoinTelegraph, the exchange said that sales of secondary crypto assets do not meet the criteria for securities transactions. Meanwhile, the exchange has not released an official statement commenting on this claim.

This is not the first time that Coinbase has been dragged under the legal scanner for allegedly violating US securities laws through illegal business operations. In January of this year, a federal judge in Manhattan challenged Coinbase and the US securities regulator over their differing views on whether and when digital assets are securities. The SEC filed a lawsuit against Coinbase last year, commenting that the exchange urged a US court to dismiss the SEC’s claim.

Despite regular run-ins with the authorities, Coinbase managed to turn a profit in the first quarter of 2024. The exchange claims to have reached $1.6 billion (approx. Rs. 13,365 crore) in total revenue and $1.2 billion (approx. Rs. 10,023 crore ) net profit for Q1 2024. The exchange also reported $1 billion (roughly Rs. 7,500 crore) in adjusted earnings before interest, taxes, depreciation and amortization.