Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesCopyBotsEarn
Crypto exchange Kraken’s motion to dismiss US SEC case denied

Crypto exchange Kraken’s motion to dismiss US SEC case denied

The BlockThe Block2024/08/22 16:00
By:The Block

Quick Take U.S. crypto exchange Kraken has failed to dismiss the case against it brought by the Securities and Exchange Commission. The SEC argues the exchange operated as an unregistered securities exchange, broker-dealer and clearing agency in addition to mishandling customer information and funds.

U.S. crypto exchange Kraken has failed to dismiss the case against it brought by the Securities and Exchange Commission. 

“[T]he SEC has plausibly alleged that at least some of the cryptocurrency transactions that Kraken facilitates on its network constitute investment contracts, and therefore securities, and are accordingly subject to securities laws,” U.S. District Judge William H. Orrick wrote in an opinion published Friday in San Francisco federal court.

In his statement, Judge Orrick noted that Kraken earned more than $43 million in revenue from its trading desk between 2020 and 2021, in part by charging a trading fee and putting few restrictions on how many assets can be bought and sold. 

The SEC  sued Kraken on Nov. 20, 2023, for operating as an unregistered securities exchange, broker-dealer and clearing agency. The agency also argued the exchange co-mingled customer assets with its own and mishandled customer information. 

In particular, the SEC alleges that Cardano’s ADA, Cosmos’s ATOM, Filecoin’s FIL, Solana’s SOL +6.02% and Near Network’s NEAR +7.24% , among six other tokens, are securities offered by Kraken.  

“While cryptocurrency itself is a relatively novel financial instrument, the principles driving the SEC’s attempt to assert regulatory authority over it are not new,” Judge Orrick wrote after a lengthy meditation on the so-called Howey test used to determine whether an asset is a security. Based on a 1946 U.S. Supreme Court case frequently cited by the SEC, that test is used to determine if an asset qualifies as an investment contract and, therefore, a security.

As part of Kraken’s motion to dismiss the case, the exchange argued that the SEC was overreaching its congressionally-approved mandate.

“The SEC does not have the authority to regulate all speculative investments,” the firm’s lawyers wrote. 

SEC Chair Gary Gensler has argued since taking office in 2021 that most digital tokens are unregistered securities that should be subject to its oversight. Under his supervision, the securities watchdog has sued some of the world’s largest crypto firms, including Binance, Coinbase and Uniswap. 

In his opinion, Judge Orrick notes that Binance and Coinbase also failed to dismiss aspects of their SEC lawsuits. 

Kraken must respond to the complaint within 20 days, and a trial date will be proposed on Oct. 15, with the original Jan. 14 date being vacated. 

In a post on X on Friday, Kraken’s Chief Legal Officer Marco Santori said the ruling confirms that the SEC cannot continue to regulate the crypto industry through enforcement. The industry has criticized the SEC over the years for bringing charges against some of the largest crypto firms and say rules are unclear or don’t fit the industry.

“To deliver clarity to the industry, to protect consumers and foster the growth of blockchain technology, Congress must pass a comprehensive market structure framework,” Santori said in the post.

Update: Aug. 23, 9:10 p.m. UTC to include comments from Santori 


0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

PoolX: Locked for new tokens.
APR up to 10%. Always on, always get airdrop.
Lock now!

You may also like

Bitcoin (BTC) Surges to New Heights Amidst Robust Capital Inflows

Bitcoin's price hits an all-time high of $93k, driven by $62.9 billion capital inflows, with ETFs playing a critical role in stabilizing the market.

Blockchainnews2024/11/27 08:43

Bitfarms Expands Board and Appoints Andrew J. Chang as Independent Director

Bitfarms announces board expansion to six members, appointing Andrew J. Chang as an independent director, following a special shareholder meeting. Key shareholder proposals were approved.

Blockchainnews2024/11/27 08:43

Pantera Bitcoin Fund Achieves 1,000x Milestone Amidst Market Surge

Pantera Bitcoin Fund reaches a significant 1,000x growth milestone, with post-election market dynamics further boosting its performance, according to Pantera Capital.

Blockchainnews2024/11/27 08:43

Bitcoin (BTC) Nears $100K Amidst Long-Term Holders' Distribution

Bitcoin approaches the $100K mark as Long-Term Holders distribute 507k BTC. The surge in price action sets a new ATH in daily realized profits.

Blockchainnews2024/11/27 08:43