In a significant victory for the Securities and Exchange Commission, a judge has ruled that the lawsuit against Coinbase can proceed to trial.

A jury will now hear the claim that the cryptocurrency exchange made unregistered sales of securities.

The shares of Coinbase experienced a decline of approximately 2.5% following the announcement of the ruling in Manhattan federal court, which rejected the company’s attempt to dismiss the SEC’s complaint.

In June, the regulator initiated legal action against Coinbase, claiming that the company was operating as an unregistered broker and exchange. The agency also insisted that the company should be “permanently restrained and enjoined” from continuing to do so.

In her ruling on Wednesday, U.S. District Judge Katherine Polk Failla stated that the transactions in question align with the criteria that courts have long used to classify securities, despite the relatively new term “crypto” being used.

“According to Failla, the Court has determined that the SEC has made sufficient allegations that Coinbase, through its Staking Program, participated in the sale and offer of securities without proper registration.”

In that ruling, the judge also agreed to dismiss the SEC’s claim that Coinbase acted as an unregistered broker by providing its Wallet application to customers.

According to CNBC, the company provided a link to a series of posts on social media platform X by Coinbase’s chief legal officer, Paul Grewal.

“We were well-prepared for this situation, and we are eager to learn more about the SEC’s internal perspectives and conversations regarding cryptocurrency regulation,” Grewal expressed.

Later on Wednesday, the SEC filed a notice of Failla’s decision in the Coinbase case on the docket of a lawsuit it has pending in federal court in the District of Columbia against Binance, another significant cryptocurrency exchange. The SEC alleges that Binance has engaged in numerous unregistered offers and sales of crypto asset securities.

The news of Wednesday’s decision arrives at a time when Coinbase is playing a significant role in the integration of cryptocurrency into Wall Street.

In January, the SEC gave its approval to a number of U.S. spot bitcoin exchange-traded funds. Several ETFs have chosen Coinbase as their custody partner.

These U.S. spot funds have experienced an impressive surge in investor interest since their launch in January. Together, they have generated approximately $52 billion.

In June, SEC Chair Gary Gensler expressed his views on trading platforms like Coinbase during an interview. He pointed out that these platforms refer to themselves as exchanges, but he highlighted concerns about the way they combine various functions.

“The New York Stock Exchange operating a hedge fund? That’s not something we see,” Gensler said at the time.