Legal Setback for Kraken: SEC Lawsuit Moves Forward
In a blow to one of the largest cryptocurrency exchanges, a California judge has ruled that Kraken must face a lawsuit brought by the US Securities and Exchange Commission (SEC). The SEC claims that Kraken has been running an unregistered securities exchange, an accusation vehemently denied by the firm. However, in a recent ruling, US District Judge William H. Orrick in San Francisco found the SEC’s argument plausible that certain crypto tokens sold on Kraken’s platform may be considered “investment contracts” and therefore subject to the agency’s oversight.
- Judge Orrick denies Kraken’s motion to dismiss the SEC’s lawsuit.
- The SEC alleges that cryptocurrency transactions on Kraken may constitute investment contracts and securities.
Kraken, much like Ripple in its ongoing battle with the SEC, argued that the agency does not have jurisdiction over digital assets. The exchange claimed to be a secondary market platform subject to different regulations compared to token issuances. However, Judge Orrick rejected this argument, stating that the SEC’s claims against Kraken were valid. This ruling represents a significant victory for the SEC, which has been taking a tougher stance on the crypto industry under Chair Gary Gensler’s leadership, contending that most digital tokens are unregistered securities.
Impact of Regulatory Crackdown on Crypto Industry
The court decision against Kraken is part of a broader trend of regulatory actions affecting the crypto sector. While Ripple secured a favorable ruling limiting the SEC’s authority over XRP sales to institutional investors, other cases such as those involving Terraform Labs and Coinbase have ended in victories for the agency.
- A Manhattan federal judge ruled last year that Ripple’s XRP token sales to the public were not within SEC jurisdiction.
- Ripple was recently ordered to pay a $125 million civil penalty, a fraction of the amount sought by the SEC.
With the SEC lawsuit against Kraken proceeding, the exchange now faces a prolonged legal battle to clarify the regulatory status of the crypto assets traded on its platform.
At the time of writing, Bitcoin (BTC) was trading at $63,647, marking a 4% increase in the 24-hour timeframe.
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