A recent ruling by a United States judge dismissed allegations against Coinbase Wallet, a move hailed as a triumph for decentralized finance (DeFi) applications. The judgment stated that Coinbase's self-custody crypto wallet does not meet the criteria of a broker, a decision celebrated by crypto legal experts as a significant setback for the SEC's efforts to regulate the industry.

Judge Katherine Failla's rejection of a SEC lawsuit against Coinbase, while not dismissing it entirely, underscored the SEC's failure to demonstrate Coinbase's wallet as acting as a broker. This ruling is considered a major victory for wallet providers and DeFi, with Zach Rosenberg, General Counsel at Ethena Labs, emphasizing that assisting Wallet users in accessing token prices does not constitute brokerage activity.

This verdict could serve as a precedent for DeFi app developers facing similar allegations of being unregistered brokers. Many industry advocates have expressed satisfaction with the ruling, labeling it as a "significant blow" to the SEC.

However, not everyone welcomed the decision. Jake Chervinsky, Legal Chief at crypto venture firm Variant, voiced concerns about certain aspects of the judge's ruling, particularly regarding the application of the legal framework used to classify securities.

The case is expected to proceed to the discovery phase, during which both Coinbase and the SEC will collect evidence to support their respective arguments. The SEC initially filed the lawsuit against Coinbase in June of the prior year, accusing it of operating as an unlicensed exchange and broker-dealer.