Kraken files objection to SEC lawsuit
Cryptocurrency exchange Kraken has filed a motion to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The movement comes later. The SEC sued Kraken in November of last year.It was claimed that the exchange operated as an unregistered stock exchange, broker, and clearing agency.
Legal battle unfolds
Kraken’s decision to seek dismissal of the lawsuit filed in the Northern District of California hinges on a key claim. In particular, the cryptocurrencies cited in the SEC’s complaint should be classified as products rather than securities. The exchange argues that the SEC’s lawsuit lacks claims of fraud or consumer harm and expands the definition of the contract.
Challenge the SEC’s claims
Kraken’s motion to dismiss rebuts the SEC’s claims by invoking the Howey test, a legal benchmark used to determine whether a particular transaction qualifies as an investment contract. The exchange argues that the SEC failed to meet the requirements set forth in the Howey test, particularly with regard to the absence of a buyer-issuer relationship that led to a reasonable expectation of profit.
Kraken further drew parallels between the cryptocurrencies mentioned in the SEC’s complaint and well-established digital assets such as Bitcoin and Ethereum that are traded as derivatives. The exchange argues that the SEC’s attempt to classify these cryptocurrencies as securities is unjustified.
In addition to objections to cryptocurrency classification, Kraken It also raises jurisdictional concerns, suggesting the SEC may be overstepping its bounds. However, the exchange does not specifically address allegations that it commingled customer funds with corporate funds, which the SEC cited as problematic conduct in its complaint.
Ultimately, Kraken’s motion to dismiss marks a pivotal moment in the legal battle between the exchange and the SEC and has significant implications for the handling of cryptocurrency regulation in the United States.
Key points:
- Kraken’s motion to dismiss challenges the SEC’s claim that it operates as an unregistered exchange, broker, and clearinghouse and argues that cryptocurrencies should be treated as commodities.
- The exchange challenges the SEC’s interpretation of the Howey test and questions the regulator’s jurisdiction over certain aspects of the cryptocurrency market.