Crypto lawyers are celebrating a recent ruling by a U.S. judge dismissing allegations against Coinbase Wallet, viewing it as a victory for self-custody wallets and decentralized finance (DeFi) applications.

U.S. District Judge Katherine Failla, on March 27, rejected Coinbase's motion to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC), determining that the SEC adequately alleged Coinbase's lack of licensing and the unregistered status of its crypto staking offering as securities.

Furthermore, the judge concluded that the SEC failed to demonstrate that Coinbase engaged in brokerage activities through Coinbase Wallet, a self-custody crypto wallet application empowering users with full control over their assets.

Zach Rosenberg, general counsel at Ethena Labs, remarked that the ruling is a significant win for browser-based wallet extensions and similar applications, emphasizing that Coinbase's assistance to Wallet users in finding token prices does not constitute broker activity or recommendations.

This court decision could serve as precedent for DeFi app developers facing similar legal challenges, enabling them to argue against allegations of unregistered brokerage.

Marisa Tashman Coppel, legal head of the Blockchain Association, expressed satisfaction with the court's rejection of what she termed "massive SEC overreach" regarding allegations against Coinbase Wallet.

However, Mike Selig, a partner at law firm Willkie Farr & Gallagher, considered the dismissal of the Coinbase Wallet case a substantial setback for the SEC's efforts, suggesting that the SEC's aim to deter the development of peer-to-peer software did not succeed.

Jake Chervinsky, legal chief at crypto venture firm Variant, acknowledged some positives in the judge's ruling but highlighted the overall victory for the SEC. Chervinsky disagreed with the court's adoption of the SEC's theory regarding token projects reinvesting sale profits into their ecosystem, viewing it as a disappointing outcome.

Despite the dismissal, the case will proceed into the discovery phase, where Coinbase and the SEC will gather evidence to support their respective arguments.

The SEC initially sued Coinbase in June of the previous year, alleging the listing of 13 tokens deemed securities and operating as an unlicensed exchange and broker-dealer, allegations which Coinbase refutes.