Kraken crypto exchange is currently confronted with a legal dispute initiated by the U.S. Securities and Exchange Commission (SEC) on the grounds of purportedly functioning as an unregistered securities exchange.
According to the SEC, certain crypto tokens available on Kraken’s platform meet the criteria of “investment contracts,” which means they are required to comply with securities legislation.
U.S. District Judge William H. Orrick determined that this claim was “credible” and therefore permitted the action to move forward. This ruling strengthens the SEC’s jurisdiction over certain aspects of the bitcoin market, a jurisdiction that has been contested by Kraken and other crypto firms.
Kraken’s stance closely resembled that of Ripple, another cryptocurrency startup currently engaged in a legal dispute with the SEC.
The exchange contended that the SEC does not possess authority over digital assets, stating that as a secondary market platform, it should be subjected to distinct regulations. Nevertheless, Judge Orrick dismissed this justification, asserting that the SEC’s allegations were within its jurisdiction as a regulatory body.
The Kraken lawsuit is a component of a more extensive regulatory enforcement effort by U.S. authorities targeting the cryptocurrency industry. The SEC has been engaged in other prominent legal proceedings, such as those involving Ripple and Coinbase.
The court’s decision in the Ripple case limited the SEC’s power to regulate the sale of XRP tokens to institutional investors instead of individual retail consumers. As a consequence, Ripple was fined $125 million, which is far lower than the SEC’s initial demand of over $2 billion.
Kraken may face a protracted and costly legal dispute as a result of the court’s decision not to dismiss the SEC’s action. The exchange is now obligated to defend the regulatory status of the cryptocurrency assets it provides.
