Kraken has officially pushed back against allegations made by the U.S. Securities and Exchange Commission (SEC), arguing that the regulator’s claims of offering unregistered securities are incorrect. The California-based cryptocurrency exchange is seeking a jury trial in response to the SEC’s lawsuit.
The legal dispute began in November 2023, when the SEC accused Kraken of offering unregistered securities to U.S. investors. In a Thursday filing, Kraken firmly denied the charges, stating that the digital assets in question—such as Cardano’s ADA, along with SOL, ALGO, MATIC, NEAR, FIL, MANA, FLOW, ICP, OMG, and ATOM—do not meet the criteria for securities.
According to Kraken, the SEC has failed to provide a clear explanation as to why these tokens were classified as securities. The platform stressed that these assets have not been proven to fail the Howey Test, a legal standard used to determine whether an asset qualifies as a security.
Regulatory Overreach Cited by Kraken
Kraken also argued that the SEC has overreached in its regulatory efforts. According to the filing, Kraken had attempted to address the SEC’s concerns, but the regulator’s unclear guidelines made resolution difficult. As a result, Kraken has now requested a jury trial to ensure the matter is fairly addressed in court.
The exchange highlighted that the SEC has yet to specifically point out which part of Kraken’s operations violated securities laws. Kraken emphasized that it does not offer traditional securities such as bonds or stocks, but provides a platform for users to trade digital assets, which are not generally classified as securities. A prior attempt to have the lawsuit dismissed was rejected by the court, leaving the exchange to continue its defense against the SEC’s claims.
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Kraken Challenges SEC’s Terminology in Lawsuit
In its latest response, Kraken raised concerns about the terminology used by the SEC in the lawsuit. The exchange argued that certain terms, including “crypto asset securities,” “Kraken-Traded Securities,” “proprietary assets,” and “investors,” were ambiguous and lacked clarity.
One of the key terms, “crypto asset securities,” was addressed in the SEC’s amended filing. The regulator clarified that this term does not imply that all crypto assets are securities by default, a point that Kraken found unclear in the original lawsuit.
Kraken’s decision to contest the SEC’s claims mirrors the legal strategy employed by Ripple, another cryptocurrency firm that has opted to fight the SEC in court. By contrast, other exchanges like eToro have chosen a different approach.
eToro recently settled with the SEC, agreeing to offer only a limited number of cryptocurrencies—Bitcoin, Ethereum, and Bitcoin Cash—to U.S. users and paying a $1.5 million fine.
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