The SEC’s claim that Coinbase Wallet is an unregistered broker has been rejected.

The U.S. District Court for the Southern District of New York has dismissed the SEC's assertion that Coinbase Wallet is an unregistered broker. Furthermore, Judge Katherine Polk Failla rejected the request to halt the staking program of the Coinbase crypto exchange.

In her ruling, the judge determined that Coinbase Inc. indeed conducted sales and offered securities under U.S. law, contrary to the SEC's allegations in their lawsuit. She also emphasized that Coinbase functions as an exchange, broker, and clearing agency under federal securities laws. Additionally, she noted that through its staking program, Coinbase engages in the unregistered sale of securities.

The court's decision granted part of Coinbase's motion to dismiss the SEC's lawsuit, specifically regarding the claim that Coinbase acts as an unregistered broker by providing its Wallet application to customers.

The SEC initially filed the lawsuit against Coinbase on June 6, 2023, asserting that the platform operated as an unregistered broker. According to the regulator, Coinbase's combination of broker, exchange, and clearing agency functions, which are typically separated in traditional markets, was illegal.

The SEC also targeted Coinbase Earn's staking program in its lawsuit, arguing that the lack of registration deprived customers of necessary protections, such as regulatory oversight, record-keeping requirements, and conflict-of-interest prevention.