Kraken seeks to dismiss SEC lawsuit citing retribution for regulatory critique Kraken seeks to dismiss SEC lawsuit citing retribution for regulatory critique
Kraken seeks to dismiss SEC lawsuit, citing lack of fraud or consumer harm.
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Updated: Feb. 23, 2024 at 10:19 am UTC
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Kraken claimed the US Securities and Exchange Commission (SEC) charges against it stemmed from its advocacy for the agency to operate within regulatory boundaries.
In a Feb. 22 blog post, Kraken said the SEC initiated legal action against the firm after its testimony before the House Financial Services Committee and the House Agriculture Committee in May 2023.
During this session, Kraken emphasized the inadequacy of current regulations in addressing the complexities of the digital asset industry. The firm further highlighted concerns regarding the overreach of the SEC and advocated for a recalibration of its jurisdiction in favor of other regulatory bodies. Kraken said the SEC revealed its intention to sue the platform after this testimony.
By November 2023, the SEC alleged Kraken operated unlawfully as an unregistered securities exchange, broker-dealer, and clearing agency. The SEC further argued that Kraken’s lack of registration deprived investors of essential safeguards mandated by the Securities Exchange Act of 1934.
The exchange firmly asserted that these charges appear to be a form of retribution for exercising its right to express political opinions. According to the firm:
“Crypto innovators in the United States should not have to fear retaliation for their political speech. They should be free to earnestly advocate for better law and more efficient markets. They should be free from intimidation by a politically compromised agency.”
Request for dismissal
Kraken has moved to dismiss the SEC charges against it with prejudice, per a Feb. 22 court filing.
Kraken said:
“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 CEO Dave Ripley described the lawsuit as an intimidation tactic by the SEC. He argued that the case does not pinpoint specific securities. Instead, the complaint seeks court validation that investment contracts can exist without tangible agreements or ongoing obligations between the issuer and buyer.
Ripley said this interpretation could grant the SEC excessive control over various forms of commerce, ranging from collectibles to commodities. He warns that if unchallenged, such actions could undermine America’s position as a global innovation powerhouse.
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Kraken
Kraken is a San Francisco-based digital asset exchange in euro volume and liquidity that trades various currencies, including Canadian dollars, US dollars, British pounds, and Japanese yen.
David Ripley is the CEO of Kraken, a San Francisco-based digital asset exchange.