The legal battle, filed in the Northern District of California, comes as Kraken faces allegations of failing to register as a broker, exchange, or clearinghouse under federal securities laws—a charge that has also been leveled at crypto giants Binance and Coinbase
Cryptocurrency exchange Kraken is demanding a jury trial in response to the U.S. Securities and Exchange Commission’s (SEC) ongoing lawsuit, pushing back against the agency’s allegations.
Here's a summary of the latest development in the legal battle.
The legal battle stems from the SEC's allegations that Kraken failed to register as a broker, exchange, or clearinghouse under federal securities laws. The agency has also accused the exchange of offering and selling unregistered securities in the form of several crypto tokens.
In response to the SEC's claims, Kraken filed a motion on Monday, demanding a jury trial in the Northern District of California, where the lawsuit was filed. The exchange also presented 18 legal defenses against the SEC's allegations.
Kraken's defenses largely hinge on the argument that digital assets, such as the tokens offered on its platform, are not explicitly defined as securities under the Securities Act and the Exchange Act.
According to Kraken, this lack of clear designation means that the exchange was not obligated to register with the SEC.
In its filing, Kraken stated that the digital assets themselves "cannot be the investment contracts" because they do not carry the rights and obligations of financial assets that are typically regulated by the SEC.
Kraken also admitted to offering services such as margin trading and an over-the-counter desk but refuted claims that these offerings classify the platform as a securities exchange.
Furthermore, the exchange accused the SEC of overstepping its authority by taking the action "without due process and fair notice."
Kraken even suggested that the regulatory action infringed on the exchange's First Amendment rights, arguing that the SEC failed to provide sufficient notice or an opportunity to be heard before filing the complaint.
The lawsuit against Kraken is part of a broader regulatory crackdown on the cryptocurrency industry.
In 2024, the SEC has already imposed record fines on crypto firms, with penalties soaring by over 3,000% compared to the previous year.
This surge in fines is highlighted by the historic $4.5 billion settlement with Terraform Labs, making 2024 the most penalized year for the crypto sector.
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