A federal high court judge has dismissed Kraken’s motion to dismiss.
The judge said the SEC’s claims against Kraken are “reasonable.”
The SEC accused Kraken of operating an unregistered securities exchange.
In the latest development in the ongoing legal tussle between Kraken and the SEC, Willian H. Orrick, a federal high court judge, has denied the crypto exchange’s motion to quash the case altogether. This follows a previous ruling where the court rejected the SEC’s broad claim that all tokens traded on Kraken constitute securities.
William H. Orrick, a federal court judge in the United States, dismissed Kraken's motion. The judge stated that the SEC reasonably claimed that some cryptocurrency transactions on the Kraken constituted investment contracts and therefore were securities and subject to securities…
— Wu Blockchain (@WuBlockchain) August 24, 2024
Judge William H. Orrick’s decision allows the SEC’s case to proceed, stating the agency presented a reasonable argument that certain transactions on Kraken might qualify as investment contracts, thus falling under securities laws. The judge pointed to Kraken’s $43 million revenue from its trading desk between 2020 and 2021, partly generated through fees and trading restrictions, as a point of contention.
The SEC’s lawsuit against Kraken, filed in November 2023, alleges the exchange operated as an unregistered securities exchange, broker-dealer, and clearing agency. The commission also accused Kraken of mishandling customer funds and information.
Specifically, the SEC identified several cryptocurrencies offered by Kraken as securities, including Cardano’s ADA, Cosmos’s ATOM, Filecoin’s FIL, Solana’s SOL, and Near Protocol’s NEAR. While Judge Orrick acknowledged the novelty of cryptocurrency as a financial instrument, he emphasized the established principles underpinning the SEC’s regulatory efforts.
Kraken’s unsuccessful motion to dismiss centered on the argument that the SEC was exceeding its Congressional mandate. This contrasts with SEC Chair Gary Gensler’s stance that most digital tokens are unregistered securities requiring SEC oversight.
This legal battle is part of a broader SEC crackdown on crypto firms, with major players like Binance, Coinbase, and Uniswap also facing similar lawsuits. Kraken now has 20 days to respond to the SEC’s complaint before a trial date is proposed.
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