SEC lawsuit against Kraken moves forward

A judge has decided that the lawsuit accusing crypto exchange Kraken of running an unregistered securities exchange is going to trial. The company tried to weasel out of it, asking the judge to throw the case away, but no dice.

Judge William H. Orrick said that: 

“The SEC has plausibly alleged that at least some of the cryptocurrency transactions that Kraken facilitates on its network constitute investment contracts, and therefore securities, and are accordingly subject to securities laws.”

So, Kraken is being dragged into court to answer these allegations. The exchange did not respond to Cryptopolitan’s request for comments.

Under Gary Gensler, the SEC has been on a mission to clamp down the crypto industry. Gensler’s got it out for most digital tokens, calling them unregistered securities. 

He’s been banging on about how the whole digital-asset industry is dodging the rules. This lawsuit against Kraken is just the latest in the SEC’s long line of attacks on crypto platforms. 

They want all these exchanges under their thumb, arguing that they’re not playing by the rules. Ripple Labs just ended a similar fight over their XRP token. The court in Manhattan said that XRP wasn’t under the SEC’s jurisdiction when sold to the public on exchanges. 

But for sales to big institutional investors? That’s a different story. The SEC gets to have a say there. Ripple celebrated this as a win, though they still had to cough up $125 million in penalties—way less than the nearly $2 billion the SEC was gunning for. 

Kraken is hoping to pull a similar trick. They’re arguing that the SEC doesn’t get to stick its nose in their business, claiming digital assets aren’t securities and shouldn’t be treated as such. 

They even had their lawyer at a court hearing in June telling Judge Orrick not to follow the same logic as in the Terraform and Coinbase cases, where the judges sided with the SEC. But Judge Orrick seems to think there’s enough meat on the bones of this case to let it proceed.

The real fight here is about what counts as a security and what doesn’t. It’s not as clear-cut as the SEC wants it to be. Different courts have been saying different things. The Ripple case was a big deal because it split hairs between public sales and institutional sales. 

But other cases, like those against Terraform Labs and Coinbase, went the SEC’s way, muddying the waters even more. The crypto industry is stuck in the middle of all this, not knowing which way the law will land.