12:07 PM EDT, 03/27/2024 (MT Newswires) -- (Updates to add information from the judge's order, as well as remarks from Coinbase's chief legal officer. Also updates stock price movement.)

Coinbase (COIN) shares retreated Wednesday after a federal judge ruled the cryptocurrency company offers and sells securities under US law and allowing a lawsuit by the US Securities and Exchange Commission against the company to proceed.

In her ruling, US District Judge for the Southern District of New York Katherine Polk Failla ruled that "the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws."

Her order, however, dismissed claims by the SEC that Coinbase Wallet also acts as an unregistered broker, accepting the company's argument that customer assets contained through the Wallet are "self-custodied."

In remarks posted to X, the social media platform previously known as Twitter, Coinbase Chief Legal Officer Paul Grewal said that Wednesday's ruling had been expected, adding that the company was now looking forward to discovery and better understanding of the SEC's approach and reasoning to cryptocurrency regulation.

Grewal said the company also wants the US Congress "to build on the momentum we saw last year to advance comprehensive digital assets legislation," adding that legislative action was "critical if we want innovation to remain in the US."

Coinbase shares recently were 3% lower, recovering from a nearly 5% slump soon after the order was filed.

Coinbase did not immediately respond to MT Newswires' request for comment.

Price: 258.68, Change: -8.13, Percent Change: -3.05