As a seasoned crypto investor with a decade of experience under my belt, I must admit that this latest development between Kraken and the SEC has piqued my interest. Having witnessed the tumultuous journey of Ripple and its XRP token, I can’t help but feel a sense of déjà vu.
In a major blow to one of the world’s leading crypto exchanges, a court in California has ordered Kraken to respond to a lawsuit filed by the United States Securities and Exchange Commission (SEC).
Kraken Faces Uphill Legal Battle
According to the Securancy and Exchange Commission (SEC), Kraken has been functioning as an unregistered securities trading platform, a claim that Kraken strongly disputes. However, in a recent judgment issued on Friday by Judge William H. Orrick in San Francisco, it was deemed that the SEC’s argument that some cryptocurrencies traded on Kraken are considered “investment contracts” and thus fall under the SEC’s jurisdiction is reasonable and plausible.
The ruling denies Kraken’s motion to dismiss the SEC’s lawsuit, which was filed in November 2022. Judge Orrick stated in his opinion:
The Securities and Exchange Commission (SEC) suspects that certain cryptocurrency deals handled by Kraken’s platform might be considered investment contracts, making them securities. As a result, these transactions could fall under the jurisdiction of securities regulations.
As a researcher, I’ve taken a stance analogous to Ripple‘s in their ongoing dispute with the SEC, contending that the regulatory body may not have the authority to oversee digital assets, much like the Kraken argument suggests.
The company argued that, functioning as a trading platform for existing tokens rather than directly issuing them, it falls under distinct legal guidelines compared to the Securities and Exchange Commission’s (SEC) charges against Terraform Labs.
Nevertheless, Judge Orrick did not allow Kraken’s differentiation argument, instead finding the SEC’s charges against the exchange to be legitimate. This decision represents a substantial victory for the regulatory body, as under Chair Gary Gensler, it has grown more assertive in its approach towards the crypto sector, maintaining that most digital tokens are unregistered securities.
Escalating Crypto Crackdown
The Kraken verdict follows a series of varied decisions regarding the SEC in notable cryptocurrency disputes. While a federal court in Manhattan ruled last year that Ripple’s XRP token sales did not fall under the SEC’s jurisdiction, other courts have supported the SEC, such as in its cases against Terraform Labs and Coinbase.
The court decision on Ripple (referred to as “The Ripple ruling”) that restricted the Securities and Exchange Commission’s (SEC) power solely to oversee XRP sales to institutional investors, was considered a significant triumph for the cryptocurrency sector. Nevertheless, it was recently mandated that the exchange must settle a $125 million civil fine – just a small fraction of the almost $2 billion penalty the SEC had initially demanded.
For Kraken, the California court’s refusal to dismiss the SEC’s lawsuit means the exchange now faces the prospect of a protracted legal battle over the regulatory status of the crypto assets traded on its platform.
At the time of writing, BTC was trading at $63,647 surging over 4% in the 24-hour time frame.
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2024-08-24 17:42