The past 24 hours have been a rollercoaster for Bitcoin investors and cryptocurrency investors in geneal.
Shortly after Bitcoin dropped nearly 30 percent in value on Friday, Coinbase—one of the largest bitcoin marketplaces in the country—temporarily halted trading. The company claimed technical difficulties necessitated the move.
“Due to today's high traffic, buys and sells may be temporarily offline,” Coinbase wrote on the exchange’s status page. “We're working on restoring full availability as soon as possible.”
Coinbase trading resumed a couple hours later, after the company announced it had “resolved” the issue. But many people are wondering: Was the temporary shutdown legal?
As pointed out by The Outline, it is against the law for the NYSE to halt trading without following the Securities and Exchange Commission’s guidelines; however, the legality of Coinbase’s decision is unclear, as there is very little precedent.
Attorney Ross Kamhi, who also writes about about legal issues regarding cryptocurrency, told The Outline that Coinbase could face a lawsuit for disabling trading without following proper protocol.
“Courts have not yet ruled on whether federal securities laws or consumer protection laws apply in the cryptocurrency context,” Kamhi said. “We’re starting to finally see a lot more lawsuits filed against companies that are issuing tokens in the ICO context. We’re also seeing lawsuits filed against exchanges. We don’t yet know how things will pan out with Coinbase, but if investors lose money from a hack or shutting down trading, there is sure to be litigation.”
Kamhi stressed it isn’t exactly illegal for a cryptocurrency exchange to shut down trading; however, depending on the set of circumstances, investors might have a case.
“Presumably an exchange's terms of service allows it to halt transactions under certain circumstances, and as far as I understand it there is nothing inherently illegal about this,” Kamhi said. “That doesn't mean an investor has no legal claim, but, again, it depends on the specific circumstances.”