tl;dr
Kraken, a crypto exchange, is disputing the U.S. Securities and Exchange Commission's (SEC) allegations of operating as an unregistered securities exchange, broker, dealer, and clearing agency. The exchange's lawyers argue that the SEC's claims would expand its jurisdiction and redefine investment c...
Kraken, a crypto exchange, is disputing the U.S. Securities and Exchange Commission's (SEC) allegations of operating as an unregistered securities exchange, broker, dealer, and clearing agency. The exchange's lawyers argue that the SEC's claims would expand its jurisdiction and redefine investment contracts. Kraken asserts that the SEC fails to identify the securities in question and that digital assets traded on its platform are not investment contracts as defined by the Supreme Court.
The SEC contends that Kraken offered 11 different "crypto asset securities" and should have registered with the regulator, citing the Supreme Court's decision in SEC v. W.J. Howey Co. to support its position. The exchange’s lawyers argue that the SEC’s argument would widen the definition of investment contracts and expand the regulator’s jurisdiction outside of its delegated responsibility.
“When pressed to identify the securities in question, the SEC points to things that Kraken does not and could not trade, broker, or settle. Instead of identifying an investment contract, the SEC asks the Court to accept an ‘investment concept’ as sufficient. Instead of identifying an enterprise, the SEC asks the Court to accept an ‘ecosystem.’ But Kraken does not trade, broker, or settle ‘concepts’ or ‘ecosystems.’ The SEC never plainly alleges that what actually is traded, brokered, and settled on Kraken is itself an investment contract. This failure spotlights the fundamental problem with the SEC’s case. The only things that are alleged to be traded, brokered, or settled on Kraken are digital assets – which are not investment contracts.”
The SEC has argued that Kraken hawked 11 different “crypto asset securities” on its platform and was required by law to register with the regulator. “The Supreme Court’s decision in SEC v. W.J. Howey Co. compels a contrary conclusion. The Howey Court defined an ‘investment contract’ under the Securities Act and Exchange Act to mean ‘a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.'”
The crypto exchange Kraken is pushing back against claims made by the U.S. Securities and Exchange Commission (SEC). In November, the SEC charged Kraken with operating its crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency. Earlier this year, Kraken filed in US District Court to dismiss those charges, and the company provided additional arguments in support of that motion on Thursday.
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