Judge Denies Kraken’s Motion to Dismiss SEC Lawsuit, Setting Back the Company

In a legal battle between SEC vs Kraken, the U.S. SEC has emerged victorious in its ongoing lawsuit against Kraken, a major U.S.-based cryptocurrency exchange. Judge William Orrick of the Northern District of California ruled on Friday that the SEC vs Kraken case could move forward, rejecting the exchange’s motion to dismiss the lawsuit.

Let’s delve into the details of the ruling!

Eleanor Terrett Highlights “Double Blow” to Kraken

Eleanor Terrett, a journalist at Fox Business, pointed out that this ruling was a significant setback for Kraken. The judge not only dismissed Kraken’s motion to dismiss but also agreed with the SEC’s argument that the crypto tokens sold on Kraken’s platform were offered or sold as investment contracts, in line with the Howey Test used to determine the security status of transactions.

SEC’s Authority Affirmed Despite Kraken’s Arguments

This ruling marks a notable victory for the SEC, reaffirming its authority to regulate cryptocurrencies within the scope of existing congressional powers. Despite Kraken’s parent company, Payward, Inc., claiming that the SEC exceeded its jurisdiction, invoking the Supreme Court’s “major questions doctrine,” Judge Orrick dismissed this argument, stating that the SEC’s cryptocurrency regulation did not meet the threshold for triggering the major questions doctrine.

Key Legal Question: Are Crypto Assets Securities?

The crucial point at hand is whether the crypto assets traded on Kraken’s platform can be considered securities, thus falling under the SEC’s regulatory oversight. While the judge did not provide a definitive ruling on this matter, he found the SEC’s arguments compelling enough to warrant further judicial review, referencing a previous Ninth Circuit ruling that suggested a broader definition of securities that encompasses profit-seeking activities.

SEC’s Stance

The SEC advocates for trading platforms like Kraken to register and implement fraud prevention measures, demonstrating the agency’s commitment to regulate the crypto industry.

What’s Next for the SEC and Cryptocurrency Exchanges?

The SEC is poised to maintain its strict stance against other cryptocurrency exchanges, with ongoing legal battles against Binance and Coinbase. The outcomes of these cases could have significant implications for the future regulatory landscape of the cryptocurrency industry in the United States.

Also Check Out: Digital Currency Group Settles Debts, Focuses on New Grayscale Products

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