Jai Sahu
Kraken, a leading cryptocurrency exchange, has filed a request to dismiss the lawsuit brought by the Securities and Exchange Commission (SEC), arguing that allowing the case to proceed would establish a “dangerous precedent.”
Kraken has submitted a motion to the court seeking the dismissal of the SEC’s lawsuit filed in November. The SEC claimed in its lawsuit that Kraken’s parent companies were running the exchange’s crypto trading platform without proper registration as a securities exchange, broker, dealer, or clearing agency.
A similar lawsuit has been filed by the SEC against Coinbase.
In a blog post, Kraken stated, “Today, we filed a motion asking the Court to dismiss the SEC’s lawsuit against Kraken. The SEC’s Complaint did not claim any fraud or consumer harm whatsoever. It made only a registration-based argument that Kraken operates as an unlicensed securities exchange, broker, dealer, and clearing agency because crypto tokens are so-called ‘investment contracts.’ Even taking all of the SEC’s allegations in the Complaint as true – and many are not – its argument is flawed as a matter of law.”
Kraken emphasizes that allowing this case to proceed would establish a “dangerous precedent for agency overreach.” The exchange highlights that the SEC has not identified any “contract” between buyers on Kraken and token issuers, thus refuting the existence of an “investment contract.”
Kraken also argues that the SEC’s attempt to expand its jurisdiction lacks precedent and relies on ambiguity and contradiction.
“Vigorously Defend Our Position.” — Kraken
Kraken firmly denies the SEC’s claims and pledges to “vigorously” defend its position. According to the SEC’s complaint, “since at least September 2018, Kraken has made hundreds of millions of dollars unlawfully facilitating the buying and selling of crypto asset securities.”
The SEC is seeking injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains, interest, and penalties. However, it mentioned that it settled with Kraken for $30 million in February. The SEC also stated that the exchange agreed to cease offering or selling securities through crypto asset staking services or staking programs.
In November, Jesse Powell, co-founder of Kraken, criticized US regulators, particularly the SEC, calling them “masochists attacking America” and “extortionists chasing crypto companies out of the country.”
Kraken contends that the SEC’s unclear rules and challenging registration processes make it difficult for crypto companies to comply. It argues that although the regulator has urged crypto exchanges to register, it lacks legal support for its position.
The cryptocurrency exchange argues that the SEC has made it challenging for crypto companies to register and comply with the unclear rules. Additionally, it maintains that the regulator “has repeatedly challenged crypto exchanges to come in and register,” but lacks “a single law” supporting its position.