(Bloomberg) — The US Securities and Exchange Commission can proceed with its lawsuit against Coinbase Inc., the biggest US cryptocurrency-trading platform, claiming the company failed to register as a securities business, a federal judge in New York ruled.

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The SEC adequately alleged that Coinbase engages in the “unregistered sale and offer of securities” and illegally operates as an exchange, a broker and a clearing agency under federal securities laws, US District Judge Katherine Polk Failla said in her opinion Wednesday.

The decision is a blow to Coinbase and other cryptocurrency players who have argued the SEC has no power to regulate them because they don’t traffic in “securities” that have to be registered. The judge, however, dismissed claims that Coinbase’s Wallet application acts as a broker under the US law.

Shares of Coinbase were down 3.7% after falling as much as 4.8%.

“The ‘crypto’ nomenclature may be of recent vintage, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years,” the judge wrote.

The ruling is a win for the SEC, which has asserted jurisdiction over crypto and has won rulings from several judges in New York in cases claiming authority over crypto firms.

Read More: Coinbase Says Crypto Like Beanie Babies in SEC Case Hearing

The ruling comes at an early stage of the case in which the judge was asked to decide whether the SEC’s claims, if true, are sufficient for the case to go forward. Coinbase still has opportunity to defeat the case after evidence-gathering or on appeal.

The case “likely enters a prolonged discovery phase of months if not years,” plus appeals, said Elliott Stein, senior litigation analyst for Bloomberg Intelligence. Final resolution may require a decision by the US Supreme Court, Stein said.

“We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” said Paul Grewal, chief legal officer for Coinbase, in a post on X. Grewal said the company remains confident in its legal arguments against the SEC’s suit.

The SEC sued Coinbase in June, claiming that, beginning in 2019, Coinbase made billions of dollars illegally promoting the sale of securities. The SEC claims Coinbase has failed to register, as required, as an exchange, a broker and a clearing agency.

“It’s the economic realities of a transaction, not the labels, that determine whether a particular offering constitutes a security,” an SEC spokesperson said in a statement. Failure to register and follow the securities laws deprives investors of “critical protections,” the spokesperson said.

The case is Securities and Exchange Commission v. Coinbase Inc., 23-cv-04738, US District Court, Southern District of New York (Manhattan).

—With assistance from Chris Dolmetsch.

(Updates with details of next steps in case.)

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