A U.S. federal court has denied Kraken’s attempt to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC), allowing the case to proceed. In this case. SEC is accusing Kraken of operating as an unregistered securities exchange.
The lawsuit, which was filed last November, claimed that some cryptocurrency transactions on Kraken’s platform qualify as investment contracts and should be regulated as securities under U.S. law.
According to the court’s ruling, the SEC has made a plausible case that certain activities on Kraken’s platform involve securities, subjecting them to federal securities laws.
Kraken, which offers trading for various cryptocurrencies, has consistently argued that the assets on its platform do not meet the legal definition of securities. However, the U.S. District Court for Northern California found that formal investment contracts are not the only criteria for determining whether an asset is a security.
The court emphasized that the broader context, including how the assets are marketed and the expectations of investors, plays a role in that determination.
This ruling is one of SEC’s ongoing efforts to assert its authority over the cryptocurrency industry, particularly in defining what qualifies as a security. There’s also a similar case with Coinbase exchange which also is facing allegations from SEC.
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