A United States judge recently dismissed allegations against Coinbase Wallet, hailing it as a victory for decentralized finance (DeFi) apps. The ruling indicated that Coinbase’s self-custody crypto wallet does not classify it as a broker, a judgement celebrated by crypto lawyers who consider it a significant blow to the SEC’s attempts to regulate the sector.
Judge Katherine Failla’s refusal to dismiss a SEC lawsuit against Coinbase came with the determination that the SEC had failed to prove that Coinbase acted as a broker through its wallet. The decision is seen as a significant win for wallet providers and DeFi, with Ethena Labs general counsel Zach Rosenberg highlighting the importance of the ruling’s grounds: the fact that Coinbase assists Wallet users in finding token prices does not imply brokerage activity.
This ruling could serve as a defence for DeFi app developers facing similar allegations of acting as unregistered brokers. Various industry advocates have expressed satisfaction over the ruling, with some calling it a “significant setback” for the SEC.
However, the decision was not universally celebrated. Crypto venture firm Variant’s legal chief, Jake Chervinsky, expressed concerns over certain aspects of the judge’s ruling, particularly regarding the application of the legal framework used to categorize securities.
The case is set to move into the discovery phase where both Coinbase and the SEC will gather evidence to support their arguments. The SEC first filed the lawsuit against Coinbase in June the previous year, accusing it of operating as an unlicensed exchange and broker-dealer.