cryptocurrency trading platform According to court filings made in the Northern District of California on Thursday, Kraken has requested that the charges made against it by the Securities and Exchange Commission (SEC) be dismissed in order to prevent a “significant reordering” of the country’s financial regulatory framework.
In November of last year, the SEC filed a lawsuit against Kraken, claiming that the company had failed to register as an exchange, clearinghouse, or broker. Months have passed since accusations regarding Kraken’s previous staking service had been resolved.
The cryptocurrency business took action to dismiss the SEC’s complaint in February 2024. As CoinDesk previously reported, it made the case that cryptocurrencies—at least, those mentioned in the SEC’s complaint—should be regarded more like commodities than securities.
In opposition to Kraken’s move for dismissal, the SEC submitted a 39-page document last month, stating that “it is simply not the case that this enforcement action exceeds the authority Congress granted the SEC.”
“The SEC was created by Congress to enforce the Securities Act and Exchange Act, including the requirement that securities intermediaries register with the SEC,” stated the filing dated April. “In applying the Howey test in its determination that Kraken must register, the SEC is simply following its Congressional mandate.”
The SEC went on to say that Congress does not need to “enact bespoke laws to each new technology that emerges,” and that it is not “assuming new powers.”
The newest response from Kraken to the SEC’s move to dismiss revolves around how far the Howey test—which establishes what constitutes a security—can be used to interpret the SEC’s jurisdiction. It accomplishes this by assessing if four requirements are satisfied: capital must be invested in a joint venture with the goal of making a profit that is supported by the efforts of others.
“The SEC cannot satisfy Howey’s additional requirements that there be investments of money in a common enterprise with a reasonable expectation of profits based on the efforts of others,” Kraken’s attorneys stated. “By greatly extending the SEC’s authority to a variety of investment operations that were never assigned to the agency, this would severely undermine Howey. Congress should have the last word on any major overhaul of the financial regulatory framework in the United States, not the courts.”
On June 12, Judge William H. Orrick is expected to hear the case.