Kraken Responds to SEC Lawsuit With Call for Dismissal

In the ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), Kraken has once again called for the dismissal of the lawsuit filed against it. Kraken argues that the SEC has inaccurately used certain terms in its legal charges. According to a recent letter from Kraken, referenced by Bloomberg, the exchange highlighted that the SEC erroneously substituted the phrases “investment concept” and “ecosystem” for “investment contract” and “enterprise.” Kraken asserts that the regulator has failed to pinpoint any actual investment contracts that were allegedly facilitated through its platform.

The SEC maintains that the specific terminology used does not inherently define the nature of a security, arguing that the definition extends beyond mere words to include the underlying actions, as supported by existing case law. This stance comes in response to Kraken’s claim that the mislabeling by the SEC has significant implications for the case.

The legal dispute began in November of the previous year when the SEC accused Kraken of operating without the necessary licenses since 2018. The agency’s lawsuit alleges that Kraken acted as a securities exchange, broker, dealer, and clearing agency without authorization, generating substantial revenue in the process. The lawsuit also suggests that Kraken may have commingled client funds with its own, raising the potential for losses.

The SEC has requested that the court permanently prohibit Kraken from operating as an unregistered exchange and impose fines while also requiring the return of funds obtained through these alleged improper practices.

In March, showing their support for the exchange, a group of state attorneys general challenged the U.S. Securities and Exchange Commission (SEC), alleging that it has exceeded its authority in its lawsuit against the cryptocurrency exchange.