Kraken Rejects SEC Allegations, Insists Crypto Assets Aren’t Securities

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As a seasoned analyst with a background in both traditional finance and the burgeoning world of cryptocurrencies, I find myself intrigued by the ongoing saga between Kraken and the US Securities and Exchange Commission (SEC). Having closely followed the evolving landscape of crypto regulations, it seems that the SEC’s approach to digital assets is akin to a game of Whack-a-Mole, with one entity after another popping up as targets.

Once more, the decentralized cryptocurrency trading platform, Kraken, denies the claims made by the U.S. Securities and Exchange Commission (SEC), stating that the exchange did not offer digital assets classified as unregistered securities.

Kraken vs. SEC, A Battle Of Legal Definitions

The San Francisco-based exchange firmly maintained that they did not breach federal securities regulations. More precisely, they stated that the digital assets traded on their platform do not fit the legal description of securities or investment contracts.

To clarify, the statement indicates that digital assets like Algorand (ALGO), Cosmos (ATOM), Polygon (POL), Filecoin (FIL), Solana (SOL), and Cardano (ADA) – along with other assets accessible on the platform – are not considered investment contracts. Kraken is preparing for a jury trial against the SEC.

The exchange writes in its official filing:

Kraken has attempted to collaborate with the SEC to facilitate registration, but their attempts have encountered resistance at every turn. Instead of working together, the SEC has opted for a confrontational approach, challenging other regulatory bodies for enforcement power that its Chair publicly acknowledged was not within their purview.

For those not in the know, back in November 2023, the Securities and Exchange Commission (SEC) brought a legal action against Kraken. The allegation was that Kraken had been running an unlicensed digital asset exchange for cryptocurrencies. Not surprisingly, Kraken’s CEO, Jesse Powell, voiced his disapproval of the SEC lawsuit, labeling it as a “persistent effort” towards regulation.

Despite criticism that it’s overly strict with cryptocurrency companies, Kraken has received backing from U.S. Senator Cynthia Lummis. She contends that the SEC cannot solely rely on enforcement actions without clearly defined crypto regulations.

In its submitted documents, Kraken references the landmark decision in SEC v. W.J. Howey Co., which introduced the Howey Test – a benchmark used to identify if an action falls under the category of a security or investment contract. The crypto exchange has underscored that the Securities and Exchange Commission (SEC) failed to demonstrate that the cryptocurrencies in question comply with the criteria for being classified as securities.

Kraken, an exchange, has chosen to take its case to a jury trial against the financial regulator (SEC), following a federal judge’s decision that allowed the SEC’s lawsuit against them to move forward. This decision is made as the SEC has admitted that the term “crypto asset security” carries some room for vague understandings.

US SEC’s Crackdown On Crypto Entities Continues

In response to the US Securities and Exchange Commission’s perceived aggressive involvement in the cryptocurrency sector, various states have united to protect businesses dealing with digital assets. This is because these states possess stringent regulations intended to shield their consumers from potential risks, surpassing federal securities standards.

By August 2024, OpenSea, a prominent NFT marketplace, found itself under scrutiny from the Securities and Exchange Commission (SEC) after receiving a Wells notice. This regulatory warning suggested that some of the NFTs traded on OpenSea might be classified as securities. At the moment of reporting, Bitcoin was valued at $58,461, marking an increase of 1.5% over the previous 24 hours.

Kraken Rejects SEC Allegations, Insists Crypto Assets Aren’t Securities

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2024-09-14 14:11