Kraken Challenges SEC’s Classification of Solana and Other Cryptos as Securities in Court Battle

• Kraken has issued an official response to the SEC’s lawsuit, refuting claims of running an unregistered securities exchange.
• In their latest court documents, Kraken requested a jury trial and contested the SEC’s designation of 11 crypto assets as “crypto asset securities.”
• These assets include Solana (SOL), Cardano (ADA), Algorand (ALGO), Cosmos Hub (ATOM), and Filecoin (FIL), among others.

Kraken refutes SEC’s allegations in a high-stakes legal battle, challenging the agency’s oversight on crypto assets.

Kraken’s Formal Response and Legal Stand

In its detailed court filing, Kraken maintained that a previous court ruling has already dismissed the SEC’s efforts to classify the cited crypto tokens as securities. The filing emphasized that these tokens do not meet the established legal criteria for securities, a view supported by a Northern California judge’s recent ruling. Despite allowing the lawsuit to move forward, the judge cast doubt on the SEC’s classification efforts.

Legal Precedents and Core Arguments

Marco Santori, Kraken’s Chief Legal Officer, highlighted that the court’s recent stance mirrors that in the Ripple case, distinguishing between a token and any contractual agreements around it. “Fundamentally, the court in Kraken’s case made the same distinction as in the Ripple case: A token isn’t a security, but agreements around a token could be,” Santori shared on Twitter.

SEC’s Allegations and Kraken’s Operational History

Kraken refuted the SEC’s allegations, pointing out that the exchange has been active since 2013 without any prior notice from the agency that its operations were deemed illegal. The exchange’s legal team argued that the absence of clear regulatory guidance has significantly contributed to the current legal predicament. Notably, in 2021, SEC Chair Gary Gensler acknowledged that a regulatory framework for crypto exchanges did not exist within the SEC.

Divergent Rules and Regulatory Transparency

Kraken criticized the SEC for its opacity and inconsistent communication during the investigation, arguing that the commission failed to specify which transactions were illegal. Furthermore, Kraken accused the SEC of obstructing its attempts to register and comply with regulations, emphasizing that efforts to align with legal standards were consistently hindered by conflicting rulings and guidelines from the agency.

A Troubled History with SEC

This legal battle is not Kraken’s first encounter with the SEC. The exchange previously dealt with litigation concerning its crypto staking services, resolving the matter by paying a $30 million fine and halting staking services for U.S. clients. Concurrently, the SEC has been proactive, issuing public warnings about scams involving “crypto asset securities” and advising investors to be cautious of deceptive practices exploiting new technologies.

Conclusion

Kraken’s firm stance against the SEC’s allegations underscores a broader tension within the crypto industry regarding regulatory clarity and enforcement. The outcome of this lawsuit may have far-reaching implications for regulatory practices in the crypto space, potentially establishing new precedents for how digital assets are classified and controlled. As Kraken continues to challenge the SEC’s authority and argue for clearer guidelines, the industry watches closely, recognizing the importance of this case in shaping the future regulatory landscape of cryptocurrency exchanges.