Coinbase Shareholder Suit Dismissed in Texas Court

Coinbase Shareholder Suit Dismissed in Texas

A shareholder lawsuit against Coinbase has been dismissed by a Texas court, centering on the company’s 2025 reincorporation from Delaware. The case, brought by Gary Guillaume, alleged misconduct between April 2021 and June 2023. However, the Texas Business Court dismissed the derivative action on October 2, finding Guillaume had not satisfied the requirement to first demand Coinbase take action on the claims.

The dismissal is without prejudice, meaning the court did not rule on the merits of the alleged misconduct. The core finding concerns which state’s laws govern a shareholder’s right to sue. The court determined that Texas’s demand rule applied to Guillaume’s authority to bring the suit, even while assuming Delaware law governed the underlying claims.

Texas Demand Rule Explained

Derivative actions allow shareholders to pursue claims on behalf of a corporation. Texas law requires a specific written demand outlining the disputed conduct and requesting corporate action, followed by a 90-day waiting period. Guillaume argued that Delaware law should apply since the alleged misconduct occurred before the move to Texas, but the court focused on when the shareholder attempted to exercise their right to sue.

The court reasoned that a shareholder doesn’t have a vested right to bring a claim at a later date simply because it originated under different state law. Coinbase disclosed that Texas law would govern its affairs following the reincorporation, and the court found no evidence suggesting Coinbase circumvented the Texas demand requirement.

Implications of the Ruling

Coinbase CEO Brian Armstrong publicly welcomed the decision on October 9, stating it would encourage other companies to incorporate in Texas. The case underscores a key point: the law governing a company’s past conduct and the law governing a shareholder’s ability to challenge it can diverge after reincorporation. Coinbase’s November 2025 information statement revealed that a consenting group associated with Armstrong and Fred Ehrsam held roughly 78.40% of voting power at the time of the conversion, having approved the move to Texas.

Source: CryptoSlate