The United States Securities and Exchange Commission’s allegation that crypto firms Gemini and Genesis sold unregistered securities through the Gemini Earn program is plausible enough to continue in court, a federal judge has ruled.

In a 32-page March 13 order, New York District Court Judge Edgardo Ramos struck down Gemini and Genesis’ motions to dismiss the SEC’s lawsuit.

The judge also denied a separate bid asking the court to stop the SEC’s request ordering them to stop selling securities and for the pair to hand over Gemini Earn profits if the SEC wins the suit.

Judge Ramos said the SEC’s January 2023 suit “plausibly alleges” that Gemini Earn — a crypto yield-bearing product that was offered by Gemini and managed by Genesis — offered and sold unregistered securities, adding that the SEC sufficiently alleged Gemini Earn met the requirements of an investment contract under the Howey test — a legal framework to classify securities.

Genesis “pooled [assets] on its balance sheet” rather than segregating them and lent the funds to institutional borrowers “relying on its discretion and judgment,” and customers’ “expectation of profits was dependent on Genesis’ efforts,” Judge Ramos added.

The SEC’s allegations that Gemini Earn agreements were notes also stood, according to the order. Notes are a debt security obligating loan repayments with interest.

“At this stage, under both tests, the court finds that the complaint plausibly alleges that defendants offered and sold unregistered securities through the Gemini Earn program.”

However, the order doesn’t mean the judge will rule in favor of the SEC — the regulator still has to prove its case, and all sides will now go ahead with gathering evidence.

Related: Gemini mulled forming a ‘juggernaut’ with Genesis before it went to smoke

Last month, Genesis said in a bankruptcy court filing that it reached a deal with the SEC to settle its suit for $21 million.

In November 2022, Gemini Earn had around 340,000 customers and $900 million in assets under management, the SEC’s suit said.

The same month, FTX collapsed into bankruptcy and Genesis decided to “temporarily suspend” Gemini Earn withdrawals citing “unprecedented market turmoil” and liquidity issues.

Genesis filed for bankruptcy after the SEC’s suit in January last year. In February, Gemini agreed to return $1.1 billion to Gemini Earn customers through Genesis bankruptcy proceeding in a settlement with New York’s financial regulator.

Hall of Flame: Crypto lawyer Irina Heaver on death threats, lawsuit predictions