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Four months ago, Kraken contended the SEC’s interpretation of the Howey Test and asked the court to dismiss the case against it.
Key Notes
Kraken just introduced a major twist in its lawsuit with the US SEC.The trading platform said it wants a jury trial in the case.Kraken has maintained that it did not break federal laws regarding securities sales.Cryptocurrency exchange Kraken has taken its lawsuit with the United States Securities and Exchange Commission (SEC) a notch further. A recent court filing confirms that the exchange has requested a jury trial in the regulator’s lawsuit. In August, a California judge ruled that the SEC’s case against Kraken would proceed to trial. This was after a similar verdict was made in the lawsuits against Binance and top American exchange Coinbase Global Inc (NASDAQ: COIN).
The Top Exchanges Enforcement Action Trend
The agency sued Binance and Coinbase in June 2023, claiming they violated federal securities laws. The SEC noted that both firms failed to register their platforms as brokers, clearinghouses, or exchanges as they should. They were also accused of misleading investors and regulators as part of the suit.
In November, Kraken received a similar enforcement action from the SEC. The markets regulator accused it of commingling up to $33 billion in user funds.
The Commission stated that the crypto exchange has earned several hundred million dollars in helping users buy and sell crypto asset securities since September 2018. It also said that Kraken failed to register its broker, dealer, and clearing services with the SEC as the law requires.
Several cryptocurrencies, including Algorand (ALGO), Cardano (ADA), Decentraland (MANA), Solana (SOL), Filecoin (FIL), Cosmos (ATOM), Polygon (MATIC), OMG Network (OMG), and Near (NEAR), which Kraken facilitates, were termed securities.
Kraken Denies SEC’s Allegations
However, as reported by Coindesk, Kraken refuted the claims on Thursday, stating that it never engaged in illegal conduct. The exchange responded to each of the allegations brought against it by the SEC and even put up 18 other defenses. Kraken has based its legal argument on its interpretation of the Securities Act and the Exchange Act, as neither includes digital assets.
According to the trading platform, its failure to register with the Commission was because it was never required to do so and was not an exchange, a broker-dealer, or a clearing agent within the meaning of the Exchange Act.
Kraken also believes its regulatory obligations fell outside the SEC’s jurisdiction. The SEC failed to state “a claim upon which relief may be granted because it did not have the authority to regulate Kraken”.
“The digital assets themselves cannot be the investment contracts because they carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation,” the exchange stated.
Four months ago, Kraken contended the SEC’s interpretation of the Howey Test and asked the court to dismiss the case against it. Kraken’s lawyer, Matthew Solomon, argued against the SEC’s approach of treating the exchange as a unified “ecosystem” where all tokens are bundled as investment contracts.
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Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
