Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), filing to dismiss a lawsuit that it argues sets a “dangerous precedent” for regulatory overreach.
The SEC’s legal action, initiated in November, alleges that Kraken violated securities laws by operating as an unregistered broker, dealer, exchange, and clearing agency. Moreover, the commission accuses Kraken of commingling up to $33 billion in customer and corporate funds, even utilizing customer cash for operational expenses.
In response, Kraken has filed a motion urging the court to dismiss the lawsuit with prejudice. The exchange’s legal team contends that the SEC’s claims lack substance, failing to demonstrate that any digital asset traded on Kraken qualifies as a security or investment contract.
(9/10) U.S. crypto exchanges should not have to operate amid an onslaught of regulatory enforcement actions, while jurisdictions around the world continue advancing constructive regulatory rulemaking.
— Dave Ripley (@DavidLRipley) February 23, 2024
Kraken’s concerns extend beyond the immediate legal battle. In a blog post, the exchange warns that allowing the case to proceed could establish a concerning precedent for regulatory overreach in the industry.
According to Kraken CEO Dave Ripley, the SEC’s actions may be politically motivated. Ripley points to a timeline where the commission notified Kraken of the lawsuit just a day after the exchange testified about the SEC’s perceived “overreach in crypto and its flawed regulation-by-enforcement approach to policy making.”
As Kraken continues to defend its position, the outcome of this legal showdown could significantly impact the regulatory landscape for crypto exchanges and the broader digital asset industry.
