SEC Seeks Dismissal of Key Defenses in Kraken Lawsuit

• The U.S. Securities and Exchange Commission (SEC) has requested the Northern District Court of California to dismiss three critical defenses presented by Kraken in response to allegations of unlawful conduct.

• The lawsuit against Kraken was initiated in November 2023.

SEC's Arguments Against Kraken's Defenses

• In a motion filed on November 5, the SEC labeled Kraken's claims regarding the ambiguity of securities laws and the lack of fair notice about potential violations as "legally unsupportable."

• The SEC is also challenging Kraken's reliance on the "major questions doctrine," a legal principle stating that regulatory agencies cannot extend their authority without explicit Congressional approval.

Background of the Lawsuit

• The SEC accused Kraken of operating as an unregistered securities exchange, broker, dealer, and clearing agency since at least September 2018, alleging that the exchange generated hundreds of millions of dollars unlawfully by facilitating the trading of crypto asset securities.

• Kraken's previous motion to dismiss the case was rejected in August, with the court affirming that the definition of an "investment contract" under the Securities Exchange Act of 1934 is well-established.

Kraken's Discovery Requests

• According to the SEC's filing, Kraken has made extensive discovery requests for large volumes of documents and admissions related to the defenses that the SEC argues are not legally valid.

• The SEC contends that dismissing these defenses will help streamline the discovery process, reduce unnecessary judicial and party resources, and prevent Kraken from repeatedly raising the same issues throughout the case.

• The SEC's motion to dismiss Kraken's defenses highlights the ongoing legal battle between the regulatory body and the cryptocurrency exchange, emphasizing the complexities surrounding the application of securities laws to digital assets.