The U.S. Securities and Exchange Commission (SEC) has challenged Kraken’s defenses in a lawsuit filed in November 2023. The SEC called Kraken’s defenses “legally unsupportable” and asked for their dismissal. The regulator filed a motion on November 5 to dismiss three of Kraken’s defenses.
Kraken had claimed that there was a lack of clarity around securities laws and how they apply to virtual assets. They also argued that they were not given fair notice that their conduct was considered to be in violation of securities law. The SEC is also asking the court to reject Kraken’s “major questions doctrine” defense, which is a legal principle that agencies should not expand their regulatory powers without clear authorization from Congress.
The SEC sued Kraken for operating a platform as an unregistered securities exchange, broker, dealer, and clearing agency. The SEC alleges that Kraken made hundreds of millions of dollars unlawfully by facilitating the buying and selling of crypto asset securities since at least September 2018. Kraken’s motion to dismiss the case was rejected in August.
The SEC’s motion stated, “When denying Kraken’s motion to dismiss, this Court rejected Kraken’s assertion that the major questions doctrine foreclosed this action and also determined that the definition of ‘investment contract’ under the Securities Exchange Act of 1934 is well-settled law.”
Kraken has requested numerous discovery requests related to these defenses, which the SEC deems legally unsupportable. The SEC is urging the court to dismiss these defenses to maintain the proper scope of discovery, narrow summary judgment, save resources, and prevent Kraken from re-litigating the same issues repeatedly in the case.
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