Crypto Exchange Kraken Asks Court to Dismiss SEC Lawsuit 

Kraken files motion to dismiss SEC’s lawsuit. 

Leading crypto exchange Kraken has asked a federal judge to dismiss the lawsuit brought against it by the Securities and Exchange Commission (SEC). 

Background of the Case 

For the uninitiated, the SEC last year charged Payward and Payward Ventures, operating as Kraken, with operating as an unregistered securities exchange and clearing agency.  

The commission alleged that Kraken facilitates the trading of crypto assets, deemed as securities, including MATIC, ADA, SOL, CHZ, FIL, ATOM, and ALGO, among others. 

It bears mentioning that the SEC’s lawsuit comes several months after the exchange settled with the regulator for $30 million over offering a staking feature deemed to be securities. 

While many thought the settlement would mark the end of the SEC’s enforcement action against Kraken, the regulator charged the exchange again in November 2023, alleging that it facilitated the trading of unregistered securities. 

Kraken Motion to Dismiss 

Unlike the first enforcement action, Kraken refused to back down, as it recently filed a motion to dismiss the SEC case. 

Per a motion filed in the United States District Court for the Northern District of California on February 22, Kraken argued that the crypto assets listed in the SEC’s complaint do not qualify as securities under existing regulations. 

“The SEC does not allege that digital asset issuers entered into contracts with or undertook post-sale obligations to Kraken’s customers. In fact, the SEC alleges no relationship at all between the 11 issuers and Kraken’s customers,” Kraken said. 

In addition, Kraken slammed the SEC for failing to provide clear guidance on how the crypto industry should be regulated. It contended that it cannot be held accountable for violating securities laws without specific regulation for cryptos. 

Furthermore, Kraken argued that the SEC is overstepping its jurisdiction and imposing outdated regulatory frameworks on an evolving industry like crypto. 

Also, it cited other legal precedents where court rulings have favored exchanges, highlighting inconsistencies in regulatory interpretations. 

Meanwhile, the exchange failed to address the SEC’s allegations that it commingled its customers and corporate funds, a practice prohibited under federal securities laws. 

Notably, the SEC is expected to file an opposition to Kraken’s motion to dismiss in the coming weeks. Afterward, Kraken will also file a reply to the opposition.