Coinbase sued by US California federal court for illegal XRP sales

Following the SEC's lawsuit against Ripple, Coinbase has been sued by the California federal court for illegal XRP sales.
Coinbase has recently applied to conduct an IPO and which could be affected by the lawsuit.

The United States District Court Northern District of California has filed a lawsuit against Coinbase for the violation of the unfair competition law, alleging the exchange was selling XRP which is an unregistered security, and taking commissions from the sales.

The main idea behind the lawsuit is that Coinbase somehow knew that XRP was not a commodity and falsely represented it as such. However, considering that the SEC has just sued Ripple to clarify this exact question, it's hard to understand how Coinbase would know beforehand.

Additionally, the complaint states that Coinbase knew about XRP being a security because of his technological integration into XRP's nodes. It also accuses Coinbase of being unfair because selling XRP securities allowed the exchange to gain a competitive advantage over other exchanges that only sold commodities.

pleading fraud on information and belief, meh. color me unimpressed by this attempt. someone else will come along and take a better shot, though I am just a simple country chicken, so whaddoiknow. pic.twitter.com/vumyDkPiEZ
— Palley (@stephendpalley) December 30, 2020

Anderson Kill partner Stephen Palley thinks the lawsuit will most likely fail as he sees a couple of issues with it. Palley stated that it is not a huge risk to Coinbase compared to SEC enforcement.

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