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- Judge Orrick denies Kraken’s motion for interlocutory appeal, citing no legal precedent.
- SEC alleges Kraken traded crypto assets as unregistered securities.
A California federal judge has rejected the crypto exchange’s request for an interlocutory appeal in its ongoing case with the U.S. Securities and Exchange Commission (SEC). Judge William Orrick issued the ruling on November 18, emphasizing that an appeal would only delay resolution without advancing the case.
The SEC filed the lawsuit against Kraken in November 2023. It accused the exchange of failing to register as a broker, dealer, exchange, and clearing agency. The SEC alleges that cryptocurrencies traded on Kraken qualify as securities under the Howey Test. The case could significantly impact the regulatory landscape for the crypto industry.
Kraken denied the allegations and argued for the dismissal of the case earlier this year. The court rejected its motion in August, leading Kraken to request an appeal in September. The exchange claimed there were “substantial grounds for difference of opinion” on whether the Howey Test applies to cases lacking formal contracts or ongoing obligations.
Legal Challenges
Judge Orrick, however, dismissed this argument. He ruled that no precedent supports Kraken’s interpretation. He stated that several courts have already disagreed with the exchange’s legal position. Orrick further noted that discovery is needed to determine whether Kraken’s operations meet all the Howey Test requirements.
The SEC also moved to dismiss several of Kraken’s defences earlier this month. The regulator argued that these defenses could lead to unnecessary discovery efforts. Judge Orrick’s ruling appears to align with this stance, highlighting the importance of focusing on the central legal issues.
The lawsuit claims Kraken allowed the trading of crypto assets such as ADA, MATIC, and SOL, which the SEC considers unregistered securities. The ruling underscores the SEC’s broader enforcement strategy against crypto platforms.
Despite the setback, Kraken plans to launch its blockchain, “Ink,” in early 2025. The exchange has not yet commented on the latest decision. As discovery continues, the case will remain a focal point in the debate over crypto regulation.
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