As a seasoned financial analyst with over two decades of experience navigating the intricacies of securities regulation, I find myself closely monitoring the ongoing legal battle between the SEC and Kraken. While I have witnessed regulatory agencies take on numerous entities in various industries, the crypto space presents unique challenges due to its rapid evolution and lack of clear-cut rules.
In an ongoing legal dispute, the U.S. Securities and Exchange Commission continues to apply regulatory scrutiny towards the cryptocurrency platform, Kraken.
On November 5th, the Securities and Exchange Commission (SEC) submitted a request to discard three arguments presented by Kraken in response to the SEC’s claims that their crypto exchange has been functioning without proper registration.
In simpler terms, the Securities and Exchange Commission (SEC) did not find convincing Kraken’s arguments that U.S. securities laws were unclear when it comes to regulating the cryptocurrency sector.
Additionally, the SEC asks the court to reject Kraken’s claim that they were not properly informed about potential breaches of U.S. securities laws, according to their allegations.
Court denied Kraken’s motion to dismiss SEC lawsuit in August
In November 2023, the SEC filed a lawsuit against Kraken, alleging that they were conducting unregistered securities trading activities. The SEC claims that Kraken, represented by Payward Inc and Payward Ventures, have been breaking securities laws since 2018.
So far, the situation has progressed through various steps, including a U.S. federal court declining to dismiss the SEC’s lawsuit against Kraken in August.
After the legal conflict between the SEC and Kraken, Kraken continued to challenge the SEC’s accusations by filing a response in September.
In simpler terms, Kraken argues that the U.S. Securities and Exchange Commission (SEC) lacks jurisdiction over their digital asset trading platform as these assets are neither considered securities nor investment contracts, according to a court submission made by Kraken in September.
“Legally unsupportable defenses”
According to the most recent court correspondence, the SEC asserted that Kraken’s arguments based on the major questions doctrine in their eighth, ninth, and tenth defense lack legal justification.
In simpler terms, the SEC contends that the term “investment contract,” as defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, is not overly broad or ambiguous, and it gives adequate guidance for parties to understand what constitutes an investment contract.
The commission strongly advised the court to throw out the defendant’s arguments, emphasizing that if these arguments are not disregarded, company Kraken may seek “unnecessary and cumbersome evidence under the false claim that this discovery is somehow connected to their arguments regarding due process.” The SEC said:
“The presence of these defenses would not render their discovery relevant, but their absence would preclude Kraken from making that argument and avoid the Court having to resolve the dispute.”
The news emerges at a time when the cryptocurrency sector is optimistic about potential shifts in regulatory strategy, given Donald Trump’s victory in the 2024 U.S. presidential election on November 5, suggesting that they hope for changes in approach from the SEC.
There’s growing sentiment in the cryptocurrency sector that regulatory bodies like the Securities and Exchange Commission (SEC) are overstepping their legal boundaries, as they’ve taken similar actions against platforms such as Coinbase and Binance. This perspective portrays the SEC as a “misguided federal agency” that may be exceeding its authorized scope according to the law.
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2024-11-07 20:27