The U.S. Securities and Exchange Commission (SEC) has filed a motion in the Northern District Court of California seeking to dismiss key defenses put forth by the crypto exchange Kraken in their ongoing legal battle. The SEC argues that Kraken’s defenses, particularly its claims about unclear U.S. securities laws and the application of these laws to crypto, should be disregarded.
The regulator asserts that Kraken was given fair notice of the charges when it was accused of violating securities laws last year by offering digital assets as investment contracts. The SEC aims to streamline the case by removing what it views as unnecessary defenses, which it believes would help narrow the scope of discovery and avoid redundant legal arguments.
Kraken, in its defense, has emphasized its stance on the lack of clarity regarding the application of U.S. securities laws to digital assets. The exchange has specifically challenged the SEC’s regulatory approach, which it argues extends federal securities laws to all digital assets offered as investments.
Kraken’s legal team maintains that the SEC’s actions represent an overreach and are damaging to the crypto industry. Kraken has used the doctrines of due process and the major questions doctrine as part of its defense, asserting that it should not be penalized for operating in an unclear regulatory environment.
The SEC’s filing targets Kraken’s defenses related to the major questions doctrine and alleged due process violations, arguing that these defenses do not hold up under legal scrutiny.
Kraken Defends Against SEC Motion to Dismiss Key Legal Arguments in Crypto Lawsuit
The regulator’s motion reflects its ongoing stance that digital assets, including cryptocurrencies, fall under the purview of securities laws, which have led to other legal disputes with firms in the crypto space. The SEC aims to expedite the legal process by dismissing these defenses, hoping to minimize judicial and party resources spent on issues already addressed in the case.
In response, Kraken has accused the SEC of trying to avoid proper scrutiny by filing the motion at a politically sensitive time—on U.S. Election Day. Kraken’s attorneys, including Michael O’Connor, criticized the timing of the filing, calling it an “Election Day gambit.”
They drew parallels to a previous case involving Ripple, where the court rejected a similar motion from the SEC. Despite these challenges, Kraken remains confident in its ability to mount a successful defense against the charges, positioning itself as a staunch defender of the crypto industry against perceived overregulation.
This lawsuit is part of a broader pattern of legal tensions between the SEC and the cryptocurrency industry. The regulator has also filed suits against other major crypto firms like Coinbase and Binance, while simultaneously classifying several prominent cryptocurrencies, such as Cardano (ADA), Solana (SOL), and Polygon (MATIC), as securities.
Kraken has contested this classification, requesting a jury trial to challenge the SEC’s decision. The case comes amid rising hopes within the crypto community for a regulatory shift, especially with the potential for a change in leadership following the U.S. presidential election.
