Kraken Seeks To Get SEC Lawsuit Overturned
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On February 22, crypto exchange Kraken submitted a motion to dismiss a lawsuit brought against it by the U.S. Securities and Exchange Commission (SEC). The lawsuit, filed last November, accuses Kraken of operating as an unregistered exchange, broker, and clearinghouse.
Kraken Moves To Dismiss SEC Lawsuit
Kraken’s motion contends that the SEC’s allegations lack fraud or consumer harm claims.
Kraken’s defense in the SEC lawsuit relies on a previous court ruling involving Ripple Labs. Kraken contends that the SEC needs to demonstrate a direct connection between the creators of tokens, categorized as ‘crypto asset securities,’ and the purchasers on its platform.
The exchange’s trading system, which operates on a blind bid/ask model similar to Ripple’s programmatic sales, is argued to be beyond the scope of investment contracts. Judge Analisa Torres validated this perspective in the Ripple case.
Kraken’s position, however, questions the SEC’s categorization of tokens such as ALGO, ADA, and MATIC as securities. The motion argues that the SEC fails to plausibly allege that any of the cryptocurrencies mentioned in the complaint qualify as securities or investment contracts.
Kraken further noted that the SEC’s claim does not meet the requirements outlined by the Howey Test, a standard benchmark for identifying securities.
Additionally, Kraken rebuts the SEC’s claim in a blog post. The firm asserts that the SEC has not identified any contract between Kraken users and token issuers to support its allegation of operating an unlicensed platform for investment contracts.
Kraken warns that allowing the SEC’s claim to proceed will establish a precedent for excessive agency jurisdiction.
As a result, the crypto firm sought to dismiss the lawsuit brought against it by the SEC in the Northern District of California.
Kraken contends that the cryptocurrencies mentioned in the SEC’s allegations should be classified as commodities rather than securities.
Recall that the SEC initiated legal action against Kraken in November 2023, alleging that the company mixed customer and corporate funds. This action came months after Kraken settled charges related to its former staking service.
SEC Lawsuit May Be Politically Motivated
As Kraken finds itself embroiled in a legal battle with the SEC, speculation has emerged that there might be deeper motives behind the lawsuit.
Earlier today, Kraken CEO Dave Ripley asserted on social media X (formerly Twitter) that political motives drove the accusations leveled by the SEC.
He highlighted the timing of the SEC’s announcement to sue Kraken shortly after the exchange spoke out about the SEC’s perceived excessive involvement in the cryptocurrency sphere.
Ripley suggested that the complaint’s timing intimidates those who challenge the SEC’s authority. He added that the agency lacks evidence of illegal securities trading on Kraken’s platform.
The CEO emphasized in his post that individuals and entities involved in crypto innovation in the United States shouldn’t face reprisals for expressing their political opinions.
He argued that U.S. crypto exchanges shouldn’t have to deal with a barrage of regulatory actions while regulatory frameworks in other parts of the world evolve more constructively.
As a result, he affirmed that Kraken is taking steps to have the complaint dismissed.
