Cryptocurrency exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), demanding a jury trial in response to the agency’s ongoing lawsuit.
What Happened: The legal battle, filed in the Northern District of California, comes as Kraken faces allegations of failing to register as a broker, exchange, or clearinghouse under federal securities laws—a charge that has also been leveled at crypto giants Binance and Coinbase COIN, Coindesk reported.
Last month, a California judge ruled that the SEC's case against Kraken would move to trial, echoing similar rulings in lawsuits against Binance and Coinbase.
The SEC initially filed its complaint in November 2022, seeking to prevent Kraken from further securities violations and to reclaim what it described as “ill-gotten gains.”
The SEC specifically identified 11 tokens, including ADA, ALGO, ATOM, FIL, and SOL, as unregistered securities.
In its latest court filing, Kraken reaffirmed its denial of any wrongdoing, presenting 18 legal defenses against the SEC's claims.
Central to Kraken's argument is its assertion that the Securities Act and the Exchange Act—the laws under which the SEC operates—do not explicitly include digital assets.
As such, Kraken argues that it was never obligated to register with the agency, since it doesn't qualify as an exchange, broker-dealer, or clearing agent under the current legal framework.
“The digital assets themselves cannot be the investment contracts because they carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation,” Kraken's filing argued.
Kraken admitted to offering services such as margin trading and an over-the-counter desk, but contends that these offerings do not make the platform a securities exchange.
The company also accused the SEC of overreach, alleging the agency acted “without due process and fair notice,” even suggesting that the regulatory action infringed on Kraken's First Amendment rights.
Why It Matters: The lawsuit against Kraken is part of a broader regulatory crackdown on the cryptocurrency industry. In 2024, the SEC has imposed record fines on crypto firms, with penalties soaring by over 3,000% compared to the previous year. This surge in fines is highlighted by the historic $4.5 billion settlement with Terraform Labs, making 2024 the most penalized year for the crypto sector.
Additionally, Kraken’s legal battle mirrors other high-profile cases, such as Coinbase’s partial victory in its court struggle against the SEC. Coinbase managed to compel the SEC to produce documents regarding the classification of tokens as securities, a crucial aspect of the ongoing debate over digital asset regulation.
With the Benzinga Future of Digital Assets event set for Nov. 19, key stakeholders will no doubt be watching closely, as Kraken's defense could shape future discussions about regulatory frameworks and the evolving legal status of digital assets.
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