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A federal judge in California has denied Kraken‘s motion to appeal a decision in its lawsuit with the SEC. Judge William Orrick stated in his November 18 ruling that Kraken’s appeal would only “delay resolution” of the case.
Judge Orrick found that the SEC had sufficiently alleged that crypto transactions on Kraken constitute investment contracts under the Howey test. However, he emphasized that discovery would be needed to confirm whether these transactions truly meet the test’s criteria.
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Kraken argued that investment contracts require specific contractual obligations, but Orrick dismissed this claim, noting that courts have already ruled against this interpretation. He stated, “Several courts have addressed these issues and disagreed with Kraken’s position.”
SEC vs. Kraken: Legal Battle
The SEC previously moved to dismiss Kraken’s defenses, arguing that the laws defining investment contracts are clear and that Kraken had adequate notice. The agency also expressed concerns that Kraken might pursue excessive discovery as part of its due process defense.
Kraken, on the other hand, claimed that the Howey test leaves room for differing opinions and sought to elevate these questions to a higher court. However, this request was rejected.
This decision could serve as a pivotal moment for regulatory clarity in the cryptocurrency sector. The outcome of the SEC vs. Kraken case may influence how other crypto platforms operate within U.S. securities laws, potentially setting a precedent.
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