Digital asset exchange Kraken is facing a lawsuit filed by the US Securities and Exchange Commission (SEC).
It is accused of operating an unregistered securities exchange. A federal judge ruled this in denying a bid to dismiss the case.
District Judge On The SEC Lawsuit
In perhaps the biggest win yet for the SEC in its parallel cases against crypto exchanges, Judge William Orrick denies Kraken's motion to dismiss in full, arguing that the secondary sale of crypto assets plausibly satisfies each prong of Howey pic.twitter.com/vjuWBM0o1a
— Leo Schwartz (@leomschwartz) August 23, 2024
District Judge William H Orrick wrote in a piece published in San Francisco federal court on 23 August 2024. He said, “The SEC has plausibly alleged that at least some of the cryptocurrency transactions that Kraken facilitates on its network constitute investment contracts, and therefore securities, and are accordingly subject to securities laws”.
Kraken previously argued that it did not need to register with the agency. It said that the transactions on its platform do not involve securities and therefore do not fall under the SEC’s regulatory purview.
The SEC originally filed the lawsuit in November 2023. It claimed that Kraken’s crypto trading platform operates as an unregistered securities exchange, broker, dealer, and clearing agency.
RELATED: After US Launch, Kraken Expands Custody Services To UK, Australia
SEC Continues To Pursue Crypto Firms
The lawsuits prove that the SEC, headed by its Chair Gary Gensler, remains committed to holding crypto firms responsible for complying with securities laws and registering in a similar fashion to traditional brokerages and exchanges.
Platforms such as Coinbase have long been at odds with the SEC. Coinbase CEO Brian Armstrong, along with the Blockchain Association, and the industry’s lobbying group, dismiss the argument that digital assets, and companies that offer them, are subject to the same regulations that govern stocks and bonds.
Many market participants have long complained that the SEC is regulating by force, with Kraken being its latest victim. There is a strong belief that the regulator is creating a hostile environment in the US for the digital asset industry.
Some Democrats Echo Trump’s Call To Replace Gensler
And the current election season has seen mounting political pressure brought to bear against the SEC and Gensler over the agency’s crypto policies. Republican nominee, Donald Trump, has promised to oust Gensler if he becomes President. He plans to replace him with a pro-crypto Chair for the SEC.
BREAKING: Democrat politicians have written a letter to the DNC, asking the party to pivot away from the anti-bitcoin policies of Elizabeth Warren.
This is likely in response to polling data, the GOP pro-bitcoin policies, and President Trump speaking at @TheBitcoinConf pic.twitter.com/GSvZQAjOCu
— Pierre Rochard (@BitcoinPierre) July 27, 2024
There is also a growing movement among crypto-friendly Democrats that have called for a move away from the “anti-bitcoin policies of Elizabeth Warren” while also calling for a pro-innovation SEC chair to replace Gensler in the case of Kamala Harris winning the election.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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