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The regulator has intensified its legal pressure in the ongoing legal clash between Kraken and the U.S. Securities and Exchange Commission (SEC). In a recent filing, the SEC had requested that the Northern District Court of California dismiss several key defenses raised by Kraken.
The SEC’s filing challenges Kraken’s claim that it needed more clarity on securities laws and got proper notice about the legality of its actions. The SEC argues that Kraken should have known its operations as an unregistered securities exchange were illegal. This marks a crucial point in the case, which accuses Kraken of violating securities laws since at least 2018.
SEC Takes Aim at the Kraken Legal Arguments
The SEC’s motion specifically targets Kraken’s defense regarding the ambiguity of U.S. securities laws as they apply to digital assets. Kraken has argued that there was insufficient clarity about whether the buying and selling of certain crypto assets constituted securities transactions.
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However, the SEC dismisses this argument, citing well-established legal principles under the Securities Exchange Act 1934. The federal court confirmed this in August when rejecting Kraken’s initial attempt to dismiss the case. The SEC argues that Kraken’s activities fall under securities law, emphasizing that terms like “investment contracts” are already well-defined in legal precedent.
Major Questions Doctrine: A Defense Dismissed
Another major point in Kraken’s defense is invoking the “major questions doctrine.” This legal principle states that agencies need clear Congressional approval to expand their regulatory scope.
Kraken argued the SEC is overreaching by applying securities laws to crypto exchange activities without specific authorization from Congress. However, the SEC pointed out that the court had already dismissed this defense in August, ruling that the SEC’s actions were justified under current laws. The SEC claims Kraken is improperly trying to revive this dismissed argument by reintroducing it at various points in the case.
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Kraken’s Broad Discovery Requests Under Fire
Kraken, in its defense, requested extensive documentation from the SEC as part of the discovery process. Discovery is a phase in legal proceedings during which both sides can obtain evidence from each other.
Kraken’s demands include a vast range of documents and admissions that the SEC’s arguments are excessive and unrelated to the main issues. According to the SEC, Kraken’s requests are part of a strategy to prolong the case by revisiting points the court has already addressed.
The SEC believes dismissing Kraken’s defenses would streamline the case, helping both parties focus on the central question. By eliminating unnecessary discovery, the SEC aims to avoid extended back-and-forth legal maneuvers, which could drag out the case and drain resources.
