The U.S. Securities and Exchange Commission (SEC) intensified its legal pressure on Kraken, filing a motion to dismiss three of the exchange’s defenses in its ongoing case against the cryptocurrency platform.
The SEC alleges that Kraken has operated as an unregistered securities exchange since 2018, arguing that its services should fall under U.S. securities law.
Kraken’s defenses claim that the SEC has provided insufficient clarity on how securities laws apply to digital assets and that the exchange was not given “fair notice” of potential violations. However, the SEC’s latest motion counters this by asserting that terms like “investment contract” in the Securities Act of 1933 and Securities Exchange Act of 1934 are not “unconstitutionally vague” and provide sufficient legal guidance.
The commission urged the court to deny Kraken’s defenses, warning that allowing them would lead to “irrelevant and burdensome discovery” processes.
The legal clash follows Kraken’s September filing, which disputed the SEC’s authority to regulate digital assets, arguing that the assets traded on its platform are neither securities nor investment contracts. The case has seen multiple developments, with a federal court previously denying Kraken’s motion to dismiss the lawsuit in August.
Kraken’s lawyer also argued there were differences between Kraken’s case and previous SEC litigations involving Terraform Labs and Telegram. He referenced Judge Analisa Torres’ ruling in the SEC’s case against Ripple Labs, which determined XRP was a security when sold to institutional investors. Solomon suggested that the case most comparable to Kraken’s was Coinbase’s.
Meanwhile, the crypto industry is closely watching for regulatory shifts after Donald Trump’s victory in the 2024 U.S. presidential election. Kraken co-founder Jesse Powell has been vocal in his support, donating $1 million to Trump’s campaign.
Powell criticized the Biden administration for what he described as a “campaign of unchecked regulation by enforcement,” which he believes is weakening U.S. competitiveness in crypto asset regulation. He specifically mentioned Senator Elizabeth Warren and SEC Chair Gary Gensler as adversaries of the crypto industry.
