Kraken Rebuts SEC Claims, Says Digital Assets Not Securities
The largest cryptocurrency exchange by volume, Kraken has responded to allegations by the U.S. Securities and Exchange Commission that the firm has violated federal securities laws. The center of the issue is whether a number of digital assets Kraken offers should be considered unregistered securities under U.S. law.
Kraken Contends Popular Cryptos Not Securities
Lawyers for them have categorically denied the SEC’s charges, specifically stating that popular cryptocurrencies including Cardano (ADA), Algorand (ALGO), and Cosmos (ATOM) are just among a few that do not constitute a security according to the U.S. Securities Act of 1934.
“Kraken did not violate Sections 5, 15(a), and 17A of the Securities Exchange Act of 1934 because ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG and SOL are not securities or investment contracts,” the exchange said in its filing.
Citing Howey Test in Defence
Kraken cited the Supreme Court’s 1946 decision in SEC v. W.J. Howey Co., where the “Howey test” was articulated. The pertinent part of that test states an investment contract exists where a person “invests money in a common enterprise with the reasonable expectation of profits to be derived from the efforts of others”. Them says the various digital assets it lists don’t fit that description.
Kraken Slams the SEC’s Regulatory Approach
In addition to opposing the classification of digital assets as securities, Kraken attacked the regulatory approach employed by the SEC, claiming it had overstepped its authority. Them claimed that the guidance of the SEC was not clear with respect to the crypto industry and also that it had failed to provide sufficient notice regarding what was legally required of the company.
Lawyers for Kraken insisted that the SEC had no jurisdiction over them digital asset trading platform because “The Digital Assets are neither securities nor investment contracts.” The SEC, in general, has not treated similar digital asset cases consistently, either.
Crypto Leaders Rally Against SEC Regulation
The views of Kraken have been supported by well-known figures in the crypto industry, such as Stuart Alderoty from Ripple and Paul Grewal from Coinbase. Both have criticized the vague and often contradictory nature of crypto regulation by the agency.
Just last week, a coalition of seven U.S. states, led by Iowa Attorney General Brenna Bird, filed an amicus brief arguing the SEC’s move to regulate cryptocurrency is a “power grab” that jeopardizes innovation.
Kraken Suffers Legal Blow in Australia
While them has been fighting the SEC in the United States, it has also faced a few legal hurdles in Australia. A judgment in the Federal Court given last month ruled that Bit Trade-a subsidiary of them main company, Payward Incorporated-had contravened Australia’s Corporations Act.
Neither of these setbacks seems to change Kraken’s stance on fighting this and its quest for more clarity with regard to regulatory guidelines being put in place regarding digital assets.
