SEC Seeks to Dismiss Kraken’s “Fair Notice” and “Major Questions” Defenses Amid Criticism Over Timing
The U.S. Securities and Exchange Commission (SEC) has moved to dismiss key defenses raised by crypto exchange Kraken in an ongoing lawsuit, filing its motion in the Northern District Court of California. The SEC argues that Kraken was adequately notified about potential securities violations. Kraken’s legal team, however, views the timing of this filing—coinciding with Election Day—as a strategic maneuver by the SEC to evade scrutiny of its regulatory policies.
The SEC’s motion specifically challenges Kraken’s “fair notice” and “major questions doctrine” defenses, which Kraken argues are essential to its position, highlighting a lack of clear regulatory guidance from the SEC. Kraken contends that these issues reveal the need for improved regulatory transparency and safeguards against SEC overreach.
Is the SEC Attempting to Undermine Kraken’s Defenses?
Kraken’s legal team claims that the SEC had previously cautioned it about the classification of certain crypto assets as securities. By seeking dismissal of these defenses, the SEC aims to streamline litigation, reduce redundancy in discovery, and conserve resources, contending that issues already addressed in other cases should not be revisited.
Michael O’Connor, Kraken’s lead attorney, pointed to the SEC’s prior loss in the Ripple case, where a similar motion was denied. O’Connor criticized the SEC’s approach, accusing it of creating confusion in the crypto industry through inconsistent and flawed policies.
Kraken also argues that the SEC has obstructed its attempts to register with the agency, citing inconsistent enforcement under SEC Chair Gary Gensler. In its defense, Kraken disputes the SEC’s designation of 11 cryptocurrencies, including Solana (SOL) and Cardano (ADA), as securities and has requested a jury trial to fully examine these claims.
The timing of the SEC’s filing on Election Day has sparked speculation regarding its intent, with some suggesting that SEC Chair Gensler might step down if there is an administration change, potentially as soon as year-end.
