SEC Moves to Dismiss Three Key Defenses in Kraken Lawsuit

SUMMARY

The SEC filed a motion earlier this week seeking to dismiss three key defenses from Kraken in its ongoing lawsuit.
Kraken is accused of trying to re-litigate the same issues repeatedly, with the SEC calling their defenses “legally unsupportable.”

The U.S. Securities and Exchange Commission (SEC) has filed a motion to expel three key defenses raised by Kraken in an ongoing lawsuit. The exchange faces allegations of unlawfully operating as an unregistered securities exchange, broker, dealer, and clearing agency. The SEC contends that Kraken’s claims are legally unsupportable. These claims incorporate the lack of clarity in securities laws and the assertion of improper notice regarding violations. Moreover, the movement seeks to reject Kraken’s defense based on the “major questions doctrine.”

In November 2023, the SEC sued Kraken for facilitating the buying and selling of crypto resource securities since September 2018. This movement allegedly produced hundreds of millions of dollars in unlawful revenue. Kraken at first sought to have the case dismissed; however, the court rejected its motion in August. The court ruled that the definition of “investment contract” under the Securities Exchange Act of 1934 is well-established law. It moreover dismissed Kraken’s contention that the major questions doctrine should apply to this case.

The SEC’s motion emphasizes Kraken’s broad discovery requests. These requests seek various documents and admissions related to the disputed defenses. The SEC claims that Kraken endeavors to re-litigate the same issues at each stage of the case. Moreover, the regulator contends that dismissing these defenses will limit the discovery scope. This step will streamline the process and prevent unnecessary delays. The SEC states that continuing to challenge these defenses would squander judicial resources.

This legal fight reflects broader regulatory endeavors to improve oversight of the cryptocurrency industry. The SEC has made it clear that it intends to hold exchanges responsible for violations of securities laws. Whereas Kraken continues to challenge the charges, the SEC pushes for a quick resolution. This resolution aims to guarantee compliance with U.S. securities regulations and maintain market judgment.