Kraken, a leading U.S. cryptocurrency exchange, has requested a jury trial in response to the lawsuit filed by the U.S. Securities and Exchange Commission (SEC), marking a significant development in the ongoing legal dispute.
This follows a recent ruling by a California judge allowing the SEC’s case against Kraken to proceed to trial. The lawsuit forms part of a broader crackdown by the SEC, which has also targeted major exchanges like Binance and Coinbase, accusing them of failing to comply with federal securities regulations by not registering as brokers, clearinghouses, or exchanges.
The SEC originally filed the suit in the Northern District of California last November, aiming to prevent Kraken from further violating securities laws. The regulator has called for Kraken to forfeit its “ill-gotten gains” and face additional civil penalties. Central to the SEC’s argument is its designation of 11 tokens, including ADA, ALGO, ATOM, FIL, and SOL, as unregistered securities that were allegedly traded on Kraken’s platform without proper authorization.
In a formal response filed on Thursday, Kraken addressed all of the SEC’s claims and outlined 18 legal defenses, denying that any of its actions were illegal.
Kraken’s defense hinges on its interpretation of the Securities Act and the Exchange Act, asserting that neither of these federal laws explicitly applies to digital assets. According to the exchange, it was not obligated to register with the SEC because it does not operate as a broker-dealer, clearinghouse, or exchange under the terms defined by these acts.
Moreover, Kraken contends that digital assets should not be classified as “investment contracts” and thus do not fall under the SEC’s regulatory scope. The company argues that these tokens lack the features of traditional securities, such as stocks or bonds, and accuses the SEC of overstepping its bounds by attempting to apply outdated financial laws to the emerging cryptocurrency market.
Kraken also accused the SEC of violating due process and claims the regulator is unfairly targeting the company for exercising its First Amendment rights. The exchange maintains that its services, such as margin and over-the-counter (OTC) trading, do not equate to operating as a securities exchange, clearinghouse, or broker-dealer.
As Kraken prepares for the upcoming jury trial, the case’s outcome could have far-reaching consequences for the cryptocurrency industry, setting a precedent for how digital assets are regulated in the U.S.
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