Kraken, a cryptocurrency exchange, has argued that the SEC’s charge of unregistered securities trading is based on a misunderstanding of fundamental legal principles and has hence rejected the complaint.
Kraken, a cryptocurrency exchange, is denying the allegations made by the U.S. Securities and Exchange Commission (SEC), intensifying their legal dispute. In its November action, the SEC claimed that Kraken generated millions of dollars trading unregistered securities and that it functioned as an unregistered securities exchange.
Kraken claims the SEC’s action is without substance and based on a misunderstanding of fundamental legal principles. Their answer shows that the regulators haven’t figured out which digital assets are securities on the market.
Additionally, Kraken challenges the SEC’s decision to use non-specific terminology such as “investment idea” and “ecosystem” in place of more conventional legal words such as “investment contract” and “enterprise.” Also, if you ask Kraken, this shows that you don’t grasp the legal background of the issue at all.
In addition to the SEC’s lawsuit, Kraken has encountered other obstacles. They paid off expenses associated with their staking service a few months ago. But this new case might affect the crypto market as a whole.
According to Kraken, the SEC’s action establishes a “dangerous precedent” about the agency’s authority in the cryptocurrency industry. The SEC submitted a detailed reply, reiterating its jurisdiction, in response to Kraken’s first move to dismiss.
A distinct interpretation of investment contracts is fundamental to Kraken’s defence. Since spoken, stated, or inferred agreements do exist, they contend the SEC’s requirement of written contracts is unreasonable.
Kraken also claims that previous SEC cases involving ICOs provide support for their position. Investment contracts are defined in part by their contractual rights and responsibilities, according to Kraken’s analysis of these instances. The Howey Test is a legal method for determining whether an asset is a security.
One of the requirements for a security to pass the Howey Test is that its backers have put their money into a shared business with the hope of reaping the rewards of everyone’s hard work.
Crypto regulation is an emotive subject in the United States Congress, where this legal struggle is taking place. Suggesting that the SEC may have exceeded its jurisdiction, eight state attorneys general have sent an amicus brief in support of Kraken’s stance, further clouding the situation.
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