A federal judge in California has denied a request by cryptocurrency exchange Kraken to appeal his decision to allow a Securities and Exchange Commission lawsuit to continue, saying it “only delays resolution.”
Judge William Orrick wrote in a November 18 order denying Kraken’s request for an intermediary appeal that he found the SEC had “presented sufficient evidence” that the cryptocurrencies traded and sold on Kraken were investment contracts under the Howey test and should comply with securities laws.
“I fundamentally do not believe that certification will significantly advance the ultimate conclusion of the case,” he wrote. “While the SEC has plausibly advanced a theory of securities infringement against Kraken, only the evidence will determine whether Kraken’s transactions actually satisfy the Howey elements.”
The salient excerpt from Judge Orrick's order reminds Kraken that the decision to allow an intermediate appeal is within his discretion. Source: CourtListener
In September, Kraken asked Judge Orrick for permission to appeal the August decision to deny the motion to dismiss, arguing that there was a “substantial basis for a difference of opinion” on securities law that a higher court could answer — and potentially end the case early.
It said there were questions about whether the investment contract without a contract or without post-sale obligations could be in breach of law and whether Howey was asking for an investment in a business.
But Judge Orrick disagreed, finding that “there is no evidence since Howey” that the trial court required formal contractual forms or post-sale obligations to constitute an investment contract.
“Many courts have addressed these issues and disagreed with Kraken’s position,” he added.
The order comes after the SEC asked the court earlier this month to dismiss three of Kraken’s defenses, arguing that existing laws defined investment contracts and clearly informed the exchange.
The SEC argues that Judge Orrick should dismiss the defenses because Kraken is pursuing “the collection of irrelevant and burdensome evidence under the guise that this collection is somehow related to their due process defense.”
The SEC sued Kraken in November 2023, alleging that the exchange failed to register as an exchange, broker, dealer, and clearing house.
Kraken's attorney did not immediately respond to a request for comment outside business hours.
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