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Kraken Seeks Dismissal of SEC Lawsuit, Cites Concerns of Regulatory Overreach

source-logo  coinpedia.org 23 February 2024 02:29, UTC

Kraken CEO Dave Ripley has detailed a response to a lawsuit filed against the company by the SEC. In a series of X posts and an accompanying blog post, Ripley outlines Kraken’s stance and emphasizes the critical need for transparent and equitable regulatory frameworks within the cryptocurrency industry.

Kraken CEO Highlights Loopholes in SEC Lawsuit

In the blog post, Kraken argues that the SEC’s complaint is flawed. The SEC’s idea, according to Ripley, offers an investment contract without a contract, post-sale duties, or issuer-buyer interactions. This deviation from legal norms damages the SEC’s case, says Kraken.

The SEC sued Kraken in November, saying that it wasn’t registered as a trader, clearinghouse, or exchange. It also says that customer funds and company funds were mixed, which is similar to what was said in a previous deal about Kraken’s old staking service. Kraken’s reaction denies these claims and says the lawsuit is an attempt to scare off companies that question the SEC’s power in the crypto space.

In response to the lawsuit, Ripley argued that “The SEC’s theory is that there can be an investment contract with no contract, no post-sale obligations, and no interaction at all between the issuer and the purchaser.

In this respect, the company’s response to the lawsuit includes a motion to dismiss it, filed in the Northern District of California. The company stands by its claim that cryptocurrencies, particularly those mentioned in the SEC’s complaint, should be categorized as commodities rather than securities. Hence by challenging the SEC’s jurisdiction and legal interpretation, Kraken wants to protect the broader crypto industry from SEC’s regulatory overreach.

A critical aspect of Kraken’s defense hinges on its interpretation of the Howey test, which determines whether a transaction is an investment contract. Kraken claims that the SEC’s complaint assets do not meet the Howey test, further weakening the SEC’s case.

Impact on Crypto

Additionally, Ripley cracks down on a serious concern and claims what will happen if the SEC’s legal overreach is not stopped. Ripley says that supporting the SEC’s overreach could set a bad example, giving the agency the power to kill the crypto industry. In turn, this could also stop new ideas from coming up and put too much governmental pressure on people in the market.

In conclusion, Kraken calls for the dismissal of the SEC’s lawsuit and at the same time wants Congress to be given the power to make clear rules for the cryptocurrency business. Even though it is having trouble with the law, Kraken is still dedicated to supporting the use of cryptocurrencies and financial inclusion while opposing what it sees as excessive regulatory activity by the SEC.

Crypto Regulations