- Kraken, a United States-based cryptocurrency exchange, has filed a motion asking the court to dismiss a case filed against it by the U.S. Securities and Exchange Commission (SEC).
- The crypto exchange cited inappropriate wording by the SEC as a reason why the court should strike out the SEC’s motion.
- Kraken also noted that the filing could cause a “significant reordering” of the U.S. financial regulatory structure.
Kraken, a leading cryptocurrency exchange, is seeking dismissal of a case filed by the SEC, citing inappropriate wording and potential disruption of the U.S. financial regulatory structure.
Kraken Challenges SEC’s Case
Kraken has filed a motion to dismiss a case brought against it by the U.S. Securities and Exchange Commission (SEC). The crypto exchange argues that the SEC’s wording in its filing is inappropriate, failing to identify any specific investment contracts that were traded, brokered, or settled on Kraken. Instead, the SEC used vague terms such as “investment concept” and “ecosystem”.
Allegations of Retaliation and Regulatory Overreach
The lawsuit between the SEC and Kraken has been ongoing since November 2023, with the SEC alleging that Kraken failed to register appropriately and co-mingled customers’ funds. Kraken has countered these allegations, suggesting that the lawsuit is retaliation for political speech. The exchange points to a speech by its chief legal officer, Marco Santori, who testified about the SEC’s overreach before Congress in May last year. Kraken has publicly stated that crypto innovators should not fear retaliation for their political speech and must be protected from intimidation by a politically compromised agency.
Implications for U.S. Financial Regulatory Structure
In its latest filing, Kraken also asked the court to dismiss the SEC’s motion to avoid a significant reordering of the U.S. financial regulatory structure. The exchange argues that the SEC cannot satisfy the additional requirements of the Howey Test, which determines whether a transaction qualifies as an investment contract. Kraken’s lawyers argue that admitting the SEC’s motion would significantly expand the SEC’s jurisdiction to a host of investment activities that were never delegated to the agency, a move they believe should be debated in Congress, not in the courts.
Conclusion
Kraken’s motion to dismiss the SEC’s case represents a significant development in the ongoing tension between crypto exchanges and regulatory bodies. The outcome of this case could have far-reaching implications for the U.S. financial regulatory structure and the future of crypto innovation in the country.
