Kraken Fire in SEC Lawsuit!
Kraken, one of the major cryptocurrency exchanges, was sued by the SEC in the Northern District of California last November. The ongoing legal battle between cryptocurrency exchange Kraken and the SEC has taken a major turn. On August 23, US District Court Judge William H. Orrick for the Northern District of California dismissed the SEC's lawsuit against Kraken and ruled that it would go to trial.
The story of the Kraken case
The SEC sued Kraken, one of the largest crypto exchanges, in November 2023. It argued that the crypto exchange violated federal securities laws because it was not registered as a hacked or exchange by the agency. In the complaint, the SEC asked that Kraken be charged with stiffer penalties and barred from further security breaches. This lawsuit is part of the SEC's major violations against crypto exchanges for similar violations. Binance and Coinbase, like Kraken, tried to dismiss their respective cases, but failed.
The verdict
According to the US District Court of the SEC, at least some of the crypto transactions on the Kraken platform are investment contracts and therefore securities. And according to the Securities Act, they must be registered under the SEC. This decision was based on the Howey test, but Kraken argued that cryptos do not meet this test. For this reason, you can either classify or destroy the cryptocurrency. Kraken is not the first crypto exchange to make this statement, but the SEC is not satisfied with it. Kraken wants civil penalties.
Judge Orrick agreed that none of the cryptos listed on Kraken were securities. But he added that the terms of their sale could be considered a guarantee. The difference is very significant as it is similar to Ripple labs and XRP token. Amidst all this confusion, the judge allowed this case to proceed.
Implications for the Kraken
Marco Santori, Chief Legal Officer of Kraken Exchange, shared part of his joy of victory on social media platform X (formerly Twitter). According to him, this decision is a huge victory for Kraen as it confirms that tokens traded on exchanges are not securities.
What's next?
SEC vs Crypto legal cases have a long history. It all started with the SEC filing charges against Ripple Labs for selling their XRP token in an ico round. Over the years, the SEC has filed similar cases against many crypto projects and exchanges. Kraken Exchange is the latest victim. It will be interesting to see what happens next as the court has ordered both parties to file joint statements by October 8. The statement includes a proposed trial schedule and trial dates.
