The logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others at Times Square in New York, U.S., April 14, 2021.

Shannon Stapleton | Reuters

Coinbase shares surged Thursday, a day after a federal judge dismissed a class-action suit against the cryptocurrency exchange in a rare crypto legal victory.

Shares jumped overnight and were up nearly 24% Thursday.

The plaintiffs claimed Coinbase owned the crypto assets that it later directly sold to end users and that Coinbase’s ownership meant it “held title” over those tokens. But in a 27-page opinion, U.S. District Judge Paul Engelmayer noted contradictory claims from the plaintiffs and pointed to Coinbase’s user agreement, which said users were neither buying nor selling digital currency from the exchange and that “at all times” the title to a user’s currency remained with the user.

The judge dismissed the federal claims with prejudice, meaning the plaintiffs cannot refile the same case. Citing the dismissal of another crypto class action against Binance, Engelmayer wrote that the class-action complaints had failed to establish Coinbase’s status as an “immediate seller” or as a title holder.

The plaintiffs had also claimed that Coinbase’s marketing showed an effort to solicit a sale of securities. Engelmayer dismissed that argument.

The suit was filed in October 2021 and implicated Coinbase CEO Brian Armstrong as the primary “control person” at the exchange.

The company declined to comment on the ruling. It comes as Securities and Exchange Commission Chair Gary Gensler aggressively pursues actions in the crypto space in part by arguing they represent securities offerings.

Earlier this year, Gensler announced a joint enforcement action against crypto exchange Gemini and the now-bankrupt crypto lender Genesis Trading. At the time, Gensler said that those charges made “clear to the marketplace and the investing public that crypto lending platforms and other intermediaries need to comply with our time-tested securities laws.”

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