Kraken Demands Jury Trial in SEC Lawsuit, Challenges Definition of Crypto Assets as Securities
Cryptocurrency exchange Kraken has formally requested a jury trial in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), according to a court filing submitted on Thursday, September 12, 2024. This move comes in response to the SEC’s lawsuit filed in November 2023, which accused Kraken of operating as an unregistered securities exchange, broker, dealer, and clearing agency.
The SEC’s complaint, filed in the Northern District of California, listed 11 cryptocurrencies as unregistered securities, including Solana (SOL), Cardano (ADA), Algorand (ALGO), and Cosmos (ATOM). The regulator sought to permanently enjoin Kraken from further securities violations and demanded disgorgement of alleged “ill-gotten gains” along with civil penalties.
In its latest court filing, Kraken vehemently denies the SEC’s allegations and presents 18 separate defenses. The exchange argues that the digital assets in question do not meet the legal definition of securities under U.S. law, citing the landmark Supreme Court case SEC v. W.J. Howey Co. Kraken contends that these assets lack the characteristics of traditional securities like stocks or bonds and do not carry the associated rights and obligations.
Kraken’s chief legal officer, Marco Santori, referenced a recent ruling by a Northern California judge that cast doubt on whether the mentioned assets are actually securities. Santori interpreted this as a “significant win” for the exchange, emphasizing the distinction that “a token isn’t a security, but agreements around a token could be.”
The exchange also criticizes the SEC’s approach to regulating the crypto industry, arguing that the agency has overstepped its authority and lacks clarity in its interpretation of securities laws as applied to digital assets. Kraken claims it has operated since 2013 without prior warning from the SEC that its activities were illegal, citing a lack of clear regulatory guidance.
Furthermore, Kraken accuses the SEC of blocking efforts to register or cooperate, stating that attempts to align with regulations were “stonewalled” by inconsistent rulings and guidance. The exchange points out that in 2021, SEC Chair Gary Gensler admitted that no regulatory framework for crypto exchanges existed within the SEC’s purview.
This legal battle is part of a broader regulatory crackdown on the cryptocurrency industry, with similar lawsuits filed against major exchanges like Binance and Coinbase. The outcome of this case could have significant implications for the classification of digital assets and the regulatory landscape of the crypto market.
