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On Thursday, a court filing revealed that the prominent cryptocurrency exchange Kraken officially requested a jury trial in response to a lawsuit filed against it by the U.S. Securities and Exchange Commission (SEC). Kraken contests claims that it violated federal securities laws by operating without appropriate registration as a broker, clearing agency, or exchange.
Kraken Provides Detailed Response to SEC Allegations
Last month, a California judge ruled that the SEC’s lawsuit against Kraken would proceed similarly to ongoing cases against other major crypto exchanges, such as Binance and Coinbase. The SEC initially filed the lawsuit in November, seeking a permanent injunction to prevent further violations of securities laws, along with a request for the forfeiture of “ill-gotten gains” and additional civil penalties. The case has drawn attention, particularly due to the SEC’s classification of 11 altcoins as unregistered securities.
Following the SEC’s lawsuit, Kraken firmly denied any illegal activities. In its latest filing, the exchange responded to each of the SEC’s allegations and presented 18 separate defenses.
Kraken’s legal argument asserts that both the Securities Act and the Exchange Act do not apply to cryptocurrencies. The exchange claims it does not meet the definitions of a stock exchange, broker-dealer, or clearing agency, and therefore is not required to register with the SEC. In its court filing, Kraken stated, “Cryptocurrencies themselves cannot be investment contracts as they do not carry the rights and obligations of a stock, bond, or other financial asset subject to SEC regulation.”
Case Holds Significant Importance for the Crypto Market
The outcome of the case is closely monitored, as it may significantly impact how cryptocurrencies are classified and regulated under current securities laws. Other cryptocurrency exchanges are paying close attention, especially since the SEC has initiated similar lawsuits against Binance and Coinbase.
The SEC’s aggressive stance towards major cryptocurrency exchanges indicates a broader effort to regulate the crypto market within traditional frameworks. However, Kraken’s fight highlights ongoing debates about whether current securities laws are adequate for regulating cryptocurrencies and related services.
