A recent ruling by a federal judge indicates that Coinbase will not be able to dismiss the lawsuit filed by the US Securities and Exchange Commission (SEC) against the exchange. The judge's decision signifies a win for the SEC as it accuses Coinbase of engaging in the "unregistered offer and sale of securities."

In the ruling, the judge sided with Coinbase on one specific aspect related to the exchange's operation as an unregistered broker when providing its wallet application to users. This particular claim was dismissed from the lawsuit.

Coinbase's shares experienced a slight decline in response to the SEC's legal action alleging violations of securities laws by the exchange. The SEC claims that Coinbase combined various financial functions without registering them, leading to regulatory concerns.

Furthermore, the SEC asserts that Coinbase facilitated the offering of unregistered securities through its staking program, intensifying the regulatory issues surrounding the company's activities.

Coinbase, however, challenges the SEC's allegations by arguing that the tokens involved do not qualify as securities. The exchange maintains that cryptocurrencies represent a distinct asset class requiring tailored regulatory frameworks, despite the SEC's classification.

Amidst the legal battle, Coinbase faces an uphill task against the SEC's intensified scrutiny of the crypto industry under Chair Gary Gensler's leadership. This legal conflict is crucial for Coinbase and the broader crypto ecosystem, with CEO Brian Armstrong rallying support for the exchange's cause.

In spite of Coinbase's efforts in the legal proceedings, the Chief Legal Officer acknowledges the tough nature of the case, predicting a challenging road ahead with slim chances of early dismissal.