A federal judge in California has denied Kraken’s request to appeal a prior ruling allowing the U.S. Securities and Exchange Commission (SEC) lawsuit against the crypto exchange to move forward. The decision, issued on Nov. 18 by Judge William Orrick, emphasized that granting the appeal would “only delay resolution” of the case.
The lawsuit, filed by the SEC in November 2023, accuses Kraken of operating as a registered exchange, broker, dealer, and clearing agency. The SEC argues that the crypto assets traded on Kraken’s platform qualify as securities under the Howey Test and are therefore subject to securities laws.
Kraken has denied these allegations and previously sought to have the case dismissed, a motion Orrick rejected in August.
Kraken’s September appeal bid claimed there were “substantial grounds for difference of opinion” on whether the Howey Test applies to cases lacking formal contracts or ongoing obligations.
The exchange hoped an appellate court could address these questions and potentially end the case early. However, Orrick rejected this reasoning, stating that no precedent supports Kraken’s interpretation of investment contracts.
“Several courts have addressed these issues and disagreed with Kraken’s position,” Orrick wrote, adding that further discovery is needed to determine whether Kraken’s activities meet all elements of the Howey Test.
The SEC also requested the dismissal of several of Kraken’s defenses earlier this month, arguing they could lead to unnecessary and burdensome discovery efforts. The case remains ongoing, with discovery expected to play a critical role in its resolution.
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