Kraken is seeking to dismiss the SEC lawsuit, citing retaliation for regulatory criticism.

Kraken claimed the charges stem from its advocacy for the U.S. Securities and Exchange Commission (SEC) to operate within its regulatory bounds.

Kraken said in a Feb. 22 blog post that the SEC has begun legal action against the company following its testimony before the House Financial Services Committee and the House Agriculture Committee in May 2023.

In this session, Kraken highlighted the inadequacy of current regulations in addressing the complexities of the digital asset industry. The company further emphasized concerns about SEC overreach and argued that jurisdiction should be realigned in favor of other regulators. Kraken said the SEC announced its intention to sue the platform following this testimony.

By November 2023, the SEC alleged that Kraken had been operating illegally as an unregistered stock exchange, broker-dealer, and clearinghouse. The SEC also argued that Kraken’s lack of registration deprived investors of essential protections provided by the Securities Exchange Act of 1934.

The exchange strongly argued that this charge appears to be retaliation for exercising the right to express political opinions. According to the company:

“America’s cryptocurrency innovators need not fear retaliation for political speech. They should be free to seriously advocate for better laws and more efficient markets. “We must be free from the intimidation of politically compromised institutions,” he said.

Request for dismissal

Kraken dismissed the SEC charges with prejudice, according to a Feb. 22 court filing.

Kraken said:

“The SEC’s complaint does not allege fraud or consumer harm whatsoever. Because cryptocurrency tokens are so-called “investment contracts,” Kraken only made registration-based claims that it operates as an unlicensed stock exchange, broker, dealer and clearing agent. Even if one were to accept as fact all of the SEC’s claims in the complaint (which many do not), the claims are flawed as a matter of law.”

Kraken CEO Dave Ripley described the lawsuit as an intimidation tactic by the SEC. He argued that the case did not identify any specific securities. Instead, the complaint seeks the court’s finding that an investment contract can exist without a substantive agreement or ongoing obligation between the issuer and purchaser.

Ripley said this interpretation could give the SEC excessive control over many forms of commerce, from collectibles to commodities. He warned that if left unchallenged, such actions could undermine America’s status as a global innovation powerhouse.

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