The SEC is seeking court permission to dismiss Kraken’s major legal defenses

Michael O’Connor, Kraken’s attorney, criticized the SEC’s action on Wednesday, referring to it as a “Election Day stratagem.”

The U.S. Securities and Exchange Commission has submitted a motion in the Northern District Court of California to dismiss Kraken’s critical defenses in the ongoing legal dispute between the two entities.

According to a motion filed on Tuesday, the regulatory watchdog maintains that Kraken was given prior reasonable notice when it was accused of violating securities laws by offering crypto assets as “investment contracts” last year.

Kraken’s legal team criticized the SEC’s motion, which was filed on Election Day, as a strategy to prevent “discovery into the SEC’s lacking and inconsistent policies.”

Kraken contends that the major questions doctrine and due process violations are essential defenses that safeguard its operations from regulatory excesses. The agency is endeavoring to eliminate these claims.

The SEC maintains that Kraken’s assertion that regulatory clarity is lacking is “without merit” and that the exchange was adequately informed about the potential classification of its crypto offerings as securities.

The motion is based on the SEC’s assertion that federal securities laws extend to digital assets offered as investments, a posture that has resulted in numerous regulatory disputes with crypto firms.

The petition contends that “the Court should reject these defenses in order to keep discovery appropriately scoped, limit summary judgment, conserve party and court resources, and stop Kraken from attempting to re-litigate the same issues at every feasible step of the case.”

Michael O’Connor, Kraken’s lawyer, was very critical of both the time and the goal of the SEC’s move. He called it a “Election Day ploy” in a post on X on Wednesday.

O’Connor expressed the confidence that Kraken’s defenses would sustain scrutiny, referencing the Ripple case, in which a similar SEC motion was dismissed.

The motion also follows Kraken’s demand for a jury trial and its challenge to the SEC’s classification of 11 cryptos, including Solana (SOL), Cardano (ADA), and Polygon (MATIC), as securities.

Kraken alleged that the SEC “stonewalled” its repeated attempts to register with the agency, alleging that SEC Chair Gary Gensler has irregularly applied securities laws to the detriment of the crypto industry.

In the midst of rumors that Chair Gary Gensler may be preparing to resign, the SEC introduced its motion. Given the anticipated election victory of Donald Trump, analysts anticipate that Gensler may resign by the end of the year, in accordance with the historical practice of SEC chairman resigning during a change in administration.

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