Kraken Files Motion to Dismiss SEC Claims to Preserve US Financial Structure

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Kraken recently took a bold step in the ongoing legal battle against the U.S. Securities and Exchange Commission (SEC). It submitted a motion to dismiss the SEC’s claims to reorder the U.S. financial regulatory structure.

The case is important for U.S. financial regulations and is related to whether the SEC has power over the cryptos listed on Kraken. 

Kraken’s lawyers say that the SEC trying to regulate digital assets under current securities laws is a massive change to U.S. financial regulations.

The exchange argues that cryptos in question should be seen as ‘commodities,’ not securities, and thus out of the SEC’s jurisdiction. This landmark argument is going to be heard by Judge William H. Orrick on June 12.

The legal battle started in November 2023 when the SEC said Kraken operated as an unregistered broker, clearinghouse, and exchange. Kraken said these claims are false and has pointed out differences in how the SEC interprets the law.

SEC’s Filed An Opposition to Kraken’s Motion

Kraken’s defense relies heavily on the ‘Howey test.’ This legal term is used to determine if a transaction qualifies as an investment contract.

The exchange says the SEC has misused this test when looking at cryptos. According to Kraken, the SEC hasn’t shown that these cryptos pass the Howey test. These rules say there must be an investment of money in a business with a reasonable expectation of profits that come from the work of others.

Kraken’s lawyers pointed out how the SEC can’t meet Howey’s extra requirements. In response, the SEC opposed Kraken’s motion to dismiss – where it pointed out how Congress set up the SEC to implement the Securities Act and Exchange Act, including the provision that ‘securities intermediaries’ register with the SEC. The exchange argued this would make the SEC’s power much bigger than Congress intended.

Kraken’s legal fight with the SEC is crucial not just for its operational freedom but also for the whole crypto space.

How this case turns out could set an example for how digital assets are regulated in the future. The current legal position shows the need for well-defined rules that protect investors without slowing innovation.

Despite the legal issues in the U.S., Kraken continues to grow worldwide and is the sixth biggest crypto exchange by volume at the time of writing. Kraken Canada (Kraken CA) has been growing and has played a big part in the company’s overall growth.

Kraken CA is important in creating a safe environment for crypto trading in Canada as it follows local rules and regulations there. In fact, the most popular large-cap cryptos are available for Canadian residents. Also, many upcoming cryptos like Dymension (DYM) and Jupiter (JUP) are now listed on Kraken for Canadian residents

About Kraken

Kraken is a popular crypto exchange that was started in 2011 and is based in San Francisco. The platform has over 230 supported cryptos and over 130 trading pairs, making it suitable for different trading preferences and strategies.

It’s well-known for its safety and offers many advanced features. The exchange keeps most of its deposits in cold storage, uses two-factor authentication, and has round-the-clock server surveillance to secure users’ money.

Kraken exchange homepage

Kraken has competitive fees that are especially good for high-volume traders. The fees range from 0.00% to 0.26% with its maker-taker model. It also has advanced trading options like margin, futures, and a trading interface.

The advanced interface includes an interface that provides a full range of analytical tools and layout customization. The exchange also has 24/7 customer support via live chat and phone that ensures timely assistance for all users.

Michael Graw
Technology Expert
Michael Graw
Technology Expert

Michael Graw is an experienced writer in the business and B2B tech fields. His articles can be found on Business Insider, Entrepreneur, Tom’s Guide, and TechRadar, and cover everything from corporate finance to crypto and international tech regulation. A prolific copywriter and entrepreneur, Michael has worked with a wide range of SaaS and tech companies and has his finger firmly on the pulse of B2B tech and finance.