Kraken, a leading cryptocurrency exchange, has filed a motion to dismiss the Securities and Exchange Commission (SEC) lawsuit, arguing that allowing the case to proceed would establish a concerning precedent.
In the filing, Kraken has requested the court to dismiss the SEC’s case filed in November. The SEC alleged that Kraken’s parent companies were operating its crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency.
Similar lawsuits have been filed by the SEC against Coinbase.
In a blog post, Kraken stated, “Today, we filed a motion asking the Court to dismiss the SEC’s lawsuit against Kraken. The SEC’s Complaint did not claim any fraud or consumer harm whatsoever. It made only a registration-based argument that Kraken operates as an unlicensed securities exchange, broker, dealer, and clearing agency because crypto tokens are so-called ‘investment contracts.’ Even taking all of the SEC’s allegations in the Complaint as true – and many are not – its argument is flawed as a matter of law.”
Kraken emphasized that allowing the case to proceed sets a “dangerous precedent for agency overreach.” The exchange highlights that the SEC fails to identify any “contract” between buyers on Kraken and token issuers, thus negating the existence of an “investment contract.”
Kraken further asserts that lacking precedent to support its jurisdiction expansion, the SEC resorts to ambiguity and contradiction.
Kraken refutes the SEC’s allegations, asserting that it will vigorously defend its stance. As per the SEC’s complaint, “since at least September 2018, Kraken has unlawfully generated hundreds of millions of dollars by facilitating the trading of crypto asset securities.
The commission is pursuing injunctive relief, conduct-based injunctions, disgorgement of ill-gotten gains, interest, and penalties. However, it was noted that in February, the SEC settled with Kraken for $30 million. Additionally, the exchange agreed to cease offering or selling securities through crypto asset staking services or staking programs.
In November, Jesse Powell, co-founder of the crypto exchange Kraken, criticized US regulators, referring to them as masochists attacking America and extortionists driving crypto companies away from the country, particularly targeting the SEC.
Kraken has contended that the SEC’s unclear regulations make it challenging for crypto companies to register and comply. Moreover, it argued that the regulator has repeatedly urged crypto exchanges to register, yet lacks legal support for its stance.
