Kraken Fights SEC Lawsuit, Demands Jury Trial Over Crypto Claims

SEC Takes Legal Action Against Kraken

Kraken, a well-known cryptocurrency exchange, is seeking a jury trial in response to the U.S. Securities and Exchange Commission’s (SEC) lawsuit. Similar to Binance and Coinbase, Kraken faces allegations of violating federal securities laws for not registering as a broker, clearinghouse, or exchange. The exchange asked a California court to defend its case, and last month, a judge ruled that the lawsuit will proceed to trial.

The SEC had sued Kraken in November of the previous year in the Northern District of California, asking the court to halt Kraken’s alleged securities violations. The regulator also demanded Kraken return its “ill-gotten gains” and pay additional penalties. The SEC listed 11 cryptocurrencies, including ADA, ALGO, SOL, and MATIC, as unregistered securities offered on Kraken’s platform.

Kraken's Legal Defense

In a court filing, Kraken denied any wrongdoing, presenting 18 defenses against the SEC’s claims. The exchange argued that the Securities Act and Exchange Act do not cover digital assets, and therefore, Kraken was not required to register with the SEC. Kraken emphasized that it is neither an exchange, a broker, nor a clearinghouse under current laws.

Kraken explained that the digital assets listed on its platform do not qualify as investment contracts because they lack the typical features of traditional financial instruments like stocks or bonds. The company contended that the SEC lacks authority to regulate its operations, asserting that the services Kraken offers, such as margin trading and over-the-counter desks, do not transform the platform into a securities exchange.

First Amendment and Fair Notice Arguments

Kraken also accused the SEC of violating its First Amendment rights. The company suggested that the SEC’s action was taken without proper due process or fair notice. According to Kraken, it was unfairly targeted for exercising its legal rights, which include providing services like instant buy features and other customer tools.

In summary, Kraken is prepared to defend its position in court, arguing that the SEC’s claims are based on misinterpretations of the law and that digital assets should not fall under traditional securities regulations. Kraken’s insistence on a jury trial reflects its confidence in its legal strategy and the desire to challenge the SEC’s authority over cryptocurrency exchanges.