Crypto exchange Kraken will face the SEC!

US crypto exchange Kraken will have to face the US SEC's lawsuit against it. U.S. District Judge William H. Orrick filed the following opinion

A US federal judge has rejected crypto exchange Kraken’s motion to dismiss the Securities and Exchange Commission (SEC) lawsuit over its crypto asset staking program.

However, U.S. District Judge William H. Orrick also said in a written opinion filed on Friday in San Francisco federal court that the SEC’s argument that Kraken’s tokens are securities is unclear.

The SEC has plausibly alleged that at least some of the cryptocurrency transactions Kraken facilitates on its network constitute investment contracts and thus securities, and accordingly are subject to securities laws, Judge Orrick wrote.

In his statement, Judge Orrick noted that Kraken generated more than $43 million in revenue from its trading desk between 2020 and 2021, in part by charging a trading fee and imposing few restrictions on how many assets could be traded.

These 5 altcoins are mentioned in the lawsuit!

Specifically, the SEC alleges that Cardano (ADA), Cosmos (ATOM), Filecoin (FIL), Solana (SOL) and Near Network (NEAR) are securities offered by Kraken.

Judge Orrick gave a lengthy assessment of the Howey test, which the SEC uses to determine whether an asset is a security.

“Cryptocurrency itself is a relatively new financial instrument. However, the principles driving the SEC’s attempt to establish regulatory authority over it are not new,” Orrick wrote.

“He frequently cites a 1946 U.S. Supreme Court case from the SEC. The Howey test is also based on that case. As part of Kraken’s motion to dismiss the case, the exchange argued that the SEC exceeded its congressionally sanctioned authority.

“The SEC does not have the authority to regulate all speculative investments,” the firm’s lawyers wrote.

SEC Chairman Gary Gensler has argued since taking office in 2021 that most digital tokens are unregistered securities that should be subject to his oversight. Under his watch, the SEC has sued some of the world’s biggest crypto firms, including Binance, Coinbase and Uniswap.

In his opinion, Judge Orrick notes that Binance and Coinbase also failed to dismiss some aspects of the SEC lawsuits.

Meanwhile, Kraken is required to respond to the complaint within 20 days. In addition, the original January 14 date will be canceled and a hearing date will be proposed on October 15.

Ripple CLO supports crypto exchange Kraken!

Commenting on the recent ruling, Ripple CLO Stuart Alderoty touched on some of the finer details of the court’s decision in the Kraken vs SEC case, stating that the court has once again confirmed that there is no such thing as a “crypto asset security”.

Alderoty also noted this as a setback for the SEC. He added that the regulator’s approach to regulation by enforcement is largely based on the premise of disagreement.

On the other hand, Kraken’s Chief Legal Officer Marco Santori pointed to the Federal court ruling that shows that none of the tokens traded on Kraken are securities.

Yesterday, the judge stated that regulators’ treatment of Kraken tokens as ‘cryptoasset securities’ was ‘vague at best and confusing at worst. Santori underscored the Court’s criticism of SEC litigation tactics. He also insisted that a “written contract” is necessary to define a security. He therefore questioned the agency for repeatedly misrepresenting Kraken’s position.