Cryptocurrency exchange Kraken is facing lawsuits from the Securities and Exchange Commission for operating an unregistered securities exchange. The judge ruled on Friday.
“[T]”The SEC alleges that at least some of the cryptocurrency transactions that Kraken brokers on its network constitute investment contracts, i.e. securities, and are subject to the securities laws,” SEC District Judge William Orrick wrote. Northern District of California Friday.
Regulatory authorities It sued the exchange in November. Based on the allegations decided by Howey TestCryptocurrencies are investment contracts because they meet the four criteria of investing funds in a common enterprise in the hope of profiting as a result of the efforts of others.
The Howey test is an evaluation by the Supreme Court that considered investment contracts that are subject to securities law.
Kraken is filed to dismiss the SEC lawsuit In February.
“Once again, the Court confirmed that the framework that has been used for nearly 80 years to identify securities still applies, regardless of the label used,” an SEC spokesman said.
“Investors in crypto assets offered or sold as securities should have the same protections as investors in other securities, even when traded through an intermediary,” the spokesperson said. “Platforms trading such crypto assets must register and ensure they have safeguards in place against fraud, manipulation, commingling of customer assets and conflicts of interest. Unless they do so, investors will continue to be harmed.”
However, Kraken’s Chief Legal Officer, Marco Santori, said: Assembled the verdict “A huge win for Kraken, for the principle of transparency, and for cryptocurrency users around the world.”
“Today, a Northern California federal court ruled that, as a matter of law, none of the tokens traded on Kraken are securities,” Santori wrote on social media site X (formerly Twitter).[The ruling] Kraken also stands by its long-standing position not to list securities.”
Orrick wrote that the SEC’s approach to classifying Kraken tokens as “crypto securities” is “unclear at best and confusing at worst.”
But he wrote that his understanding of the SEC’s defense is not alleging that Kraken tokens are securities, but rather that “in the initial offering and through subsequent transactions on Kraken, those assets were offered or sold as investment contracts,” which he called an “acceptable framework.”
By drawing the distinction that tokens are not securities, but contracts about them can be, Orlick issued a ruling similar to that made by Manhattan Federal Court Judge Analisa Torres. About Ripple and its XRP token.
“The SEC has been soundly defeated on the ‘tokens are securities’ theory and will no longer be permitted to rely on it. Instead, it must prove that the elements of the Howey test were satisfied for all of Kraken’s alleged transactions,” Santori wrote to X after Friday’s ruling. “They have not been satisfied, and we look forward to proving this in discovery. Kraken will fight, and Kraken will win.”
