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- 1 Kraken, once alleged by the SEC for operating illegally in the crypto market, filed to dismiss the lawsuit.
- 2 The crypto exchange’s filing emphasized the Investment contracts, claiming no actual contracts between issues and buyers.
- 3 Kraken urged to dismiss the lawsuit and return legislative authority to Congress.
The never-ending legal battle between the SEC and Kraken stepped to a new stage. On Thursday, Kraken, the cryptocurrency exchange, filed a motion to dismiss the SEC lawsuit, questioning the agency’s regulatory overreach. Sensible and relevant rules are demanded by the crypto exchange.
Kraken’s allegations against the SEC
It all started on May 10, 2023, when Jesse Powell, Kraken CEO recommended clearer rules in the crypto industry and asked for restricting the US Securities of Exchange Commission in crypto rules and regulations.
As a reaction, in November, the agency filed a lawsuit against the crypto exchange, charging it with operating illegally as an unlisted securities exchange.
On February 22, Powell refused all these allegations and filed a motion asking the court to dismiss the case. The case was filed in the Northern District of California and mentions treating digital assets as commodities and not securities.
Although the SEC’s complaint does not claim any fraud or consumer harm, Kraken requested to dismiss the case.
The claim argues that crypto tokens on the respective exchange are “Investment contracts”. Kraken on the other hand, argued that there are no actual contracts between issues and buyers, stating the argument invalid.
The SEC represents the definition of an “Investment contract” incorrectly, said Kraken in the filing. Furthermore, the agency is supposed to exchange its roots beyond what Congress intended, trying to make it a “politically motivated power grab”.
The agency on the other hand proposed a new theory that anything that is creating value in the ecosystem can be considered as an investment contract. However, Bitcoin and Ethereum are not considered as securities, even though they are relevant to the SEC’s ecosystem theory.
Apart from these allegations, Kraken also defended its own position and community and clarified its mission and regulations.
According to Powell, the exchange supports and adopts clear regulations for the crypto sector and is continuously working toward accelerating crypto adoption. On these bases, Kraken urged to dismiss the lawsuit and return legislative authority to Congress.
The SEC is moving on the wrong path and holds incoherent theories, argued Kraken on the case.
What next?
Both parties are fighting on the definition of “investment contracts” which holds major consequences for the whole crypto sector. The SEC’s claims and regulators may influence how the future of crypto platforms are grouped and regulated,
Additionally, the agency has previously settled similar allegations against Bittrex. Also, the SEC asked to permanently ban the crypto exchange from its operations and settled charges for Kraken’s staking services.
Kraken is a trading platform and cryptocurrency exchange that delivers services such as buying, selling, trading, and learning about digital assets. The exchange was established in 2011 and supports nearly 215 cryptocurrencies, 7 fiat currencies, and 644 markets.
Mr. Pratik chadhokar is an Indian Forex, Cryptocurrencies and Financial Market Advisor and analyst with a background in IT and Financial market Strategist. He specialises in market strategies and technical analysis and has spent over a year as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the Financial markets.
