Centralized cryptocurrency trading platform Kraken has again denied claims by the U.S. Securities and Exchange Commission (SEC) that the exchange sold digital assets that qualify as unregistered securities.
Kraken vs. SEC, a battle over legal definitions
In his answerThe San Francisco-based exchange maintained that it had not violated any federal securities laws. The exchange specifically states that the digital assets sold on its platform do not meet the legal definition of securities or investment contracts.
The exchange specifically states that digital assets such as Algorand (ALGO), Cosmos (ATOM), Polygon (POL), Filecoin (FIL), Solana (SOL), and Cardano (ADA) — among others available on its platform — are not investment contracts. Kraken now plans to file a jury trial against the SEC.
The exchange writes in its official document:
Kraken has attempted to work with the SEC to make registration feasible. But the industry’s efforts have been thwarted at every turn, as the SEC has instead opted for a strategy of fighting with its sister regulators for enforcement authority, which its chairman admitted it did not have.
For the uninitiated, in November 2023, the SEC submitted filed a lawsuit against Kraken, accusing the company of operating an unregistered cryptocurrency exchange for digital assets. It’s no surprise that Kraken CEO Jesse Powell criticized the SEC’s lawsuit, calling it a “recurring attempt” at regulation.
While the SEC has become notorious for its ongoing scrutiny of crypto companies, Kraken has received support from US Senator Cynthia Lummis, who argued that the SEC “cannot continue to govern through enforcement” without clear crypto laws.
To bolster its position, Kraken cited the SEC v. W.J. Howey Co. ruling in its filing, which led to the creation of the famous Howey Test that helps determine whether a transaction qualifies as a securities or investment contract. The cryptocurrency exchange emphasized that the SEC cannot prove that the cryptocurrencies in question meet the criteria for securities.
Kraken’s decision to launch a jury trial against the financial regulator follows a federal judge’s ruling ruling which paved the way for the SEC lawsuit against the exchange to proceed to trial. It also comes at a time when the SEC recognized that the use of the term “crypto asset security” is not entirely free from ambiguous interpretations.
SEC’s crackdown on US crypto entities continues
The US SEC’s alleged over-interference in the crypto industry has forced Several states are teaming up to defend digital asset protection companies. These states have strong securities laws that protect their consumers better than federal securities laws.
In August 2024, leading non-fungible token (NFT) platform OpenSea came under the SEC’s radar when it received a Wells notice from the regulator, suggesting that NFTs traded on the platform may fall under the definition of securities. Bitcoin is trading at $58,461 at the time of writing, up 1.5% in the 24-hour time frame.
Main image from Unsplash.com, chart from TradingView.com