YEREVAN (CoinChapter.com) — Kraken, a United States-based crypto exchange, faced a legal setback when its motion to dismiss a case brought by the Securities and Exchange Commission (SEC) was denied. The SEC claims Kraken operated as an unregistered exchange, broker-dealer, and clearing agency. The case moves forward, intensifying regulatory oversight in the crypto industry.
Judge Rules SEC’s Case Against Kraken Can Proceed
U.S. District Judge William H. Orrick ruled that the SEC plausibly argued that certain transactions on Kraken’s platform qualify as securities. The judge noted that Kraken earned over $43 million between 2020 and 2021, charging fees while imposing few trading restrictions.
Kraken’s Motion Denied – U.S. District Court Order. Source: U.S. District Court, Northern District of California
The SEC’s lawsuit, filed on Nov. 20, 2023, accuses Kraken of failing to register as a securities exchange, broker-dealer, and clearing agency and of mishandling customer assets and information.
Kraken Settles with SEC for $30 Million Over Unregistered Staking. Source: U.S. Securities and Exchange Commission
SEC Targets Key Cryptos as Securities in Kraken Case Amid Broader Crypto Crackdown
The SEC identified specific cryptocurrencies, including Cardano’s ADA, Cosmos’s ATOM, Filecoin’s FIL, Solana’s SOL, and Near Network’s NEAR, as securities offered by Kraken. Judge Orrick referred to the Howey test, a legal standard from a 1946 Supreme Court case, to support the SEC’s claims. The test determines if a transaction qualifies as an investment contract, which would classify it as a security.
Kraken argued that the SEC is overstepping its authority, claiming the agency does not have the power to regulate all speculative investments. However, SEC Chair Gary Gensler has maintained that most digital tokens are unregistered securities, subject to the SEC’s oversight. The SEC has sued several major crypto firms, including Binance, Coinbase, and Uniswap, making Kraken’s case part of broader regulatory action.
Kraken Faces 20-Day Deadline to Respond to SEC; Trial Date Set for October 15
Kraken must respond to the SEC’s complaint within 20 days. A trial date of Oct. 15, replacing the original Jan. 14 date, is proposed. Kraken’s Chief Legal Officer, Marco Santori, stated that the ruling highlights the need for Congress to establish a clear market structure framework, reflecting industry concerns about the SEC’s regulatory approach.
Kraken Urges Congress for Clear Blockchain Regulation. Source: Marco Santori
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