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Judge rejects krakens bid
Judge rejects krakens bid

Cryptocurrency

Judge denies Kraken’s appeal, allowing the SEC lawsuit to proceed

A California federal judge has denied Kraken’s request to appeal a decision that lets the SEC’s litigation proceed. The ruling supports the SEC’s contention that certain crypto assets traded on Kraken’s platform qualify as unregistered securities under the Howey Test.

The SEC filed the case against Kraken in November 2023, accusing it of operating as an unlicensed exchange, broker, dealer, and clearing agency. The SEC claims that the crypto assets traded on Kraken’s platform are securities under the Howey Test, making them subject to securities regulations.

Kraken had previously sought to dismiss the complaint, claiming that the SEC’s accusations lacked sufficient grounds. However, Judge Orrick denied the motion in August. Kraken filed an interlocutory appeal in September, claiming that outstanding issues about the Howey Test and the need for written contracts or post-sale duties required a higher court’s assessment.

Judge Orrick dismissed this claim, stating that no legal precedent supports Kraken’s interpretation. “Several courts have addressed these issues and disagreed with Kraken’s position,” Orrick said, adding that the discovery process would be critical in determining if Kraken’s operations met all of the Howey Test requirements.

The SEC has also taken action to reject many of Kraken’s arguments, asserting that they would lead to unnecessary and invasive discovery requests. According to the SEC, existing regulations clearly describe investment contracts, and Kraken’s arguments about inadequate notice are unfounded.

This decision is another significant move in the SEC’s ongoing pursuit against cryptocurrency platforms suspected of marketing unregistered securities. The complaint against Kraken is part of a larger pattern of regulatory investigation that has included big exchanges like Coinbase, Binance, and others.

As the case develops, discovery will be crucial in evaluating whether Kraken’s cryptocurrency offerings violate securities laws. Kraken’s legal team has yet to respond formally to the recent verdict.

author avatar
Satpal S
Satpal is an Editor and Author at 4C Media Co, specializing in all stories and news related to crypto and finance.
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