Kraken cryptocurrency exchange has been directed by US District Judge William H. Orrick to respond to the securities law violations complaints made by the SEC. The judge has allowed twenty days for a reply. This follows another legal set back with the Australian Securities and Investment Commission.
The SEC claims Kraken’s involvement in activities resembling an unregistered securities exchange. The agency claims that some cryptos available on Kraken are investment contracts and should be subject to securities laws.
This move is in line with the crackdown by current SEC chairman Gary Gensler on exchanges and digital assets that do not comply with securities laws.
In defence, Kraken argued that digital tokens are not securities and that the SEC has no power to regulate them. The court’s refusal to dismiss the case suggests Kraken could be in for a longstanding legal struggle.
Furthermore, the judgement was a blow to Kraken as the cryptocurrency exchange was seeking financial sources to prepare for an IPO.
The laws on digital tokens are not well defined as they depend on the case and its applicable jurisdiction. Various courts have arrived at different decisions in cases similar to this one. For instance, in a case heard last year, a federal judge in Manhattan concluded that XRP tokens were not securities when they were sold on exchanges to the public.
However, other judges have supported the SEC in the cases against Terraform Labs and Coinbase, which is evidence of the split decision.
Kraken’s legal advisors have called on Judge Orrick to consider these differences and not follow the judgments provided in the Terraform and Coinbase cases. They claim that while Terraform sells tokens directly, Kraken acts as a secondary market platform that is subject to different legal requirements.
Along with its complications in the US, Kraken has also experienced legal issues in Australia. The local operator of Kraken, Bit Trade Pty Ltd., was found by the Federal Court of Australia to have committed an offence under national corporate laws.The Australian court said the exchange provided financial products without a proper target market assessment.
Kraken has complained about the recent Australian ruling but said it will follow the court’s orders. The company has, however, identified the problem of extending conventional legal mechanisms to the complex crypto world.
Furthermore, this case highlights the current controversy and the lack of global policies in the cryptocurrency sector.
The results of these lawsuits can set legal precedents for digital assets’ governance worldwide. Due to regulators’ scrutiny, Kraken and other crypto exchanges may be required to deal with a multitude of compliance issues in different jurisdictions.
August 2024, Cryptoniteuae