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Kraken Exchange relocated to the Northern District of California in an effort to have the US Securities and Exchange Commission’s lawsuit dismissed. The agency had sued the exchange platform, citing several allegations. This included operating as a broker, exchange, and clearinghouse without registering itself with relevant authorities.
Kraken has now decided to hit back and draw a line of clarification. The objective is to get it out in the open that every product it offers on the platform is a commodity and not a security. Kraken does not seem to take this lightly. The exchange platform has hit out by stating in its official blog post that the Commission was overstepping its jurisdiction, adding that there is a Major Questions Doctrine issue.
An official statement from the SEC is awaited. The Commission has, for now, stretched the definition of a contract in the lawsuit.
Kraken remains hell-bent on getting the lawsuit dismissed because cryptocurrencies listed on the platform should be treated as commodities, not securities. This fundamental aspect is likely to go on in court for a while. This is based on the ongoing legal feud between the SEC and Ripple.
One aspect where Kraken could get some relief is that the Commission has not alleged any kind of fraud and/or customer harm. The entire discussion rests on its operations without registration with the relevant and competent authorities. However, the previous allegation did include the company commingling corporate and customer funds.
There is only one claim that the SEC has made, according to the motion. It pertains to the operation of Kraken for almost a decade as an unregistered player in the market and in violation of the Exchange Act. Kraken has further supported its motion by pointing out that the SEC did not adhere to the Howey Test’s requirements.
Founded in 2011 and based in California, Kraken Exchange has always set out to ensure that its operations are favorable to customers in every possible manner. It supports 185+ cryptocurrencies and major fiat currencies, including, but not limited to, USD, EUR, and BGP. More details can be read in our review of Kraken exchange. It further sheds light on its features, like Kraken Pro and Kraken Security.
Kraken, in an official statement, said that the Commission attempts to affect the relationship between the purchaser and issuer by alleging that tokens were advertised to set out an expectation for profits.
Kraken has yet to address the point about commingling the funds of corporations and customers. The Commission has used that to strengthen its case, citing that the same would not be allowed for entities that are registered under the law and authorities.
The development comes days after the court ruled that Ripple Labs needed to produce financial statements and information for the SEC. This entails critical information related to the institutional sale of XRP tokens.