Snubbing Bitcoin Cash Against Common Law May Lead to Legal Troubles for Coinbase

The contentious ‘hard fork’ that will see the creating of Bitcoin Cash has done more than split the digital currency, dividing allegiances between exchanges. Coinbase, one of the most popular exchanges globally, has said it will not support the fork, meaning that its users will not have access to the new version of Bitcoin.

This position is in contradiction to common law property laws which state that the product of an asset will also belong to the owner of the original asset.

Thus, with Bitcoin holders entitled to an equal amount of the breakaway currency, but being denied it as customers of Coinbase, they are being denied what is rightfully theirs.

Cows and calfs

Tim Wu, a prominent legal scholar with a keen interest in technology said in a series of Tweets that Coinbase is “courting serious, maybe ruinous, legal troubles” over its decision not to give users their full value of the Bitcoin fork.

Wu compared this situation to an owner of a cow, which has a calf, and then that calf is not considered part of the original owner’s property.

He also likened it to a stock split; if a stock split happened and the broker declined to issue the new stock to its owners, that is where Coinbase find themselves.

Coinbase’s defense

Coinbase’s position to the hard fork has been conspicuously advertised, saying that it will not be supporting any currency that emerges from this fork. The company also has said in its user agreement that it has discretion in choosing to support changes in the Bitcoin software.

However, this is not enough, in Wu’s opinion, to deflect possible legal issues.

"My bottom line is that, if you're holding cows for someone else, I'm not sure it's enough to say 'we don't sell veal,'" said Wu, in an email to Fortune, referring again to the example of cows and calfs.

Coinbase has said that if in the future, it decides to support Bitcoin Cash, it will distribute the balances that accrue at the time of the Aug. 1 fork.