NEW YORK, April 5 (Reuters) - A federal appeals court on

Friday revived a lawsuit by Coinbase customers who

accused the largest U.S. cryptocurrency exchange of illegally

selling unregistered securities and failing to register as a

broker-dealer.

The 2nd U.S. Circuit Court of Appeals in Manhattan said a

lower court judge should not have relied on a December 2021 user

agreement to find that Coinbase did not hold title to, and was

not the seller of, 79 tokens that the customers traded.

In its 3-0 decision, the appeals court said Coinbase had

over time materially changed its user agreements, and the

December 2021 version was not "conclusive" when evaluating the

customers' legal claims.

Customers in the proposed class action also argued that they

never accepted that version, making it irrelevant in deciding to

dismiss their case.

Friday's decision also upheld the dismissal of claims under

the federal Securities Exchange Act seeking to rescind some

customer transactions.

The case was returned to U.S. District Judge Paul Engelmayer

in Manhattan, who had dismissed it in February 2023.

In a post on social media platform X, Coinbase's chief legal

officer Paul Grewal said the exchange welcomed the dismissal of

some claims.

"There's no private liability for the secondary trading of

digital assets on exchanges like Coinbase," he wrote. "Why?

Because contracts matter."

Jordan Goldstein, a lawyer for the customers, said they were

grateful with the decision and plan to resume their case against

Coinbase and its Chief Executive Brian Armstrong.

In finding that Coinbase wasn't a seller, Engelmayer had

said the exchange had no direct role in transactions, despite

having allegedly promoted tokens' "purported value proposition"

and distributed free tokens to boost trading volume.

On March 27, U.S. District Judge Katherine Polk Failla in

Manhattan denied Coinbase's bid to dismiss a Securities and

Exchange Commission lawsuit claiming it illegally facilitated

the trading of tokens that should have been registered as

securities.

The case is Oberlander et al v Coinbase Global Inc ( COIN ) et al,

2nd U.S. Circuit Court of Appeals, No. 23-184.