Kraken, a popular US-based cryptocurrency exchange, has categorically denied all allegations and charges slapped by the US Securities and Exchange Commission (SEC) in a lawsuit filed in November last year.
Further, Kraken has decided to contest these allegations and is seeking a jury trial. In its lawsuit, the SEC alleged that Kraken made “hundreds of millions of dollars by unlawfully facilitating the buying and selling of crypto asset securities.”
While many crypto brokers and exchange platforms in the past have opted to settle quickly with the SEC, Kraken is standing firm in defending its operations. The most recent case is of eToro, a crypto broker that faced similar charges and has decided to almost shut shop in the US after paying a settlement of $1.5 million.
In their response to the lawsuit, the crypto exchange stated that although it had tried to work with the SEC, the regulatory authority has “chosen to pursue a strategy of fighting.”
Criticizing the SEC, Kraken stated in its defense: “We have worked to comply with the SEC’s unwritten and shifting approach to digital asset regulation. But during the investigation that preceded this lawsuit, the SEC refused even to identify which digital asset transactions on Kraken’s trading platform it claimed were investment contracts.”
Simplifying The SEC Charges And Kraken’s Defense Statement
The SEC’s contention is not new. The lawsuit repeats the same old rhetorical charges, alleging that the crypto broker is unregistered and that its operations are unlawful. The SEC classifies “crypto assets” as securities and claims that Kraken has violated the law by offering services it is not authorized to provide.
In its defense, Kraken, seeking a jury trial, asserts that it will not back down. It aggressively challenges the allegations and categorically denies all charges. Taking things a step further, Kraken also questions the SEC’s role and claims that the regulatory authority is acting beyond its lawful capacity.
Kraken argues that the SEC’s approach seems more like an attempt to eliminate crypto businesses rather than being cooperative. The company claims that the SEC does not have the authority to arbitrarily classify what qualifies as securities. Kraken disputes all the allegations and seeks clarity on the ambiguous nature of crypto assets.
While it pledges cooperation in sharing relevant information with authorities, the defense filing cites the Due Process Clause, arguing that the law must “give a person of ordinary intelligence a reasonable opportunity to know what is prohibited.”
Challenging the SEC’s premise of classifying crypto assets as securities, Kraken contends that it is “impermissibly vague.” The company’s defense statement asks for an explanation of how and when it has violated U.S. securities laws. It asserts: “Due process is violated when a potentially liable party cannot reasonably know whether and when it has violated the securities laws.”
The filing by Kraken is significant. If the case goes to a jury trial, we may see legal developments that could clarify the ambiguous criteria the SEC uses to classify crypto assets as securities.
