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- Kraken has requested a jury trial in its ongoing legal dispute with the SEC.
- The SEC claims Kraken failed to register as a broker or exchange and illegally commingled user funds, which Kraken denies.
Kraken, a prominent cryptocurrency exchange, has intensified its legal battle with the United States Securities and Exchange Commission (SEC) by requesting a jury trial in the ongoing lawsuit. The lawsuit was filed by the SEC in November 2023 and alleged that Kraken had broken federal securities laws. This comes after a judge ruled in August that the case against Kraken should go to trial alongside other large crypto exchanges such as Binance and Coinbase.
According to the SEC lawsuit, Kraken has mingled up to $33 billion in the customers’ assets and has reaped hundreds of millions of dollars in the form of fees from the buying and selling of the crypto assets which the SEC claims are securities. Notably, the regulator named several cryptocurrencies, including Algorand (ALGO), Solana (SOL), and Cardano (ADA), as securities within its claims.
Kraken Refutes SEC Claims and Challenges Regulatory Authority
Kraken has strongly refuted the SEC’s allegations, claiming that the exchange has never participated in any wrong business. The defense of the legal platform is based on the analysis of the Securities Act and the Exchange Act, in which the platform claimed that neither of the laws regulates digital assets. Kraken said that there was no legal requirement to register with the SEC because Kraken is not an exchange, a broker, or a clearinghouse as defined by these laws.
Additionally, the legal representation of Kraken has targeted the SEC’s application of the Howey Test, which is a legal test to distinguish security. The exchange further notes that the digital assets that it provides market-making services for are not investment contracts because they do not possess the same rights and responsibilities that come with investing in securities such as shares or bonds. Kraken’s defense also argued that the SEC has no authority over the company and that the enforcement actions are an excessive use of jurisdiction.
The lawsuit by the SEC against Kraken is a continuation of a similar enforcement strategy that has been targeting other cryptocurrency platforms. In June 2023, the SEC sued Binance and Coinbase and accused the companies of violating the securities laws due to the lack of registration as brokers, exchanges, or clearinghouses.
The commission has also accused Kraken of engaging in unlawful activities and failing to register its services as required by federal laws. US Senator Cynthia Lummis has also come out in support of Kraken, slammed the SEC, and called for clear and concise crypto regulations to avoid overregulation.
Kraken’s Previous Legal Encounters with SEC Shape Current Defense
This is not the first time that Kraken is in a legal battle with the SEC. The court rejected an earlier motion to dismiss the lawsuit, compelling the exchange to proceed with its defense. Kraken’s lawyers have pointed out that the SEC has failed to provide enough detail to establish that the exchange is in violation of securities laws.
Kraken’s firm stance in the face of the SEC’s allegations differs from the approach taken by other cryptocurrency exchanges. For instance, eToro recently entered into a settlement with the SEC, whereby it agreed to limit its US customers to only trade in Bitcoin, Ethereum, and Bitcoin Cash and pay a $1. 5 million fine. Kraken has opted to defend the allegations in court instead of entering into a settlement with the claimants.
