Judge Denies Kraken’s Appeal in SEC Case, Citing Lack of Legal Precedent
A California federal judge has denied Kraken’s request for an interlocutory appeal in its legal battle with the U.S. Securities and Exchange Commission (SEC). Judge William Orrick ruled on November 18, stating that an appeal would delay the case’s resolution without providing any legal advantage.
The SEC filed its lawsuit against Kraken in November 2023, accusing the exchange of operating as an unregistered broker, dealer, exchange, and clearing agency. The SEC claims that the cryptocurrencies traded on Kraken qualify as securities under the Howey Test, a standard used to determine if an asset is a security. The outcome of the case could have significant implications for the crypto industry’s regulatory future.
Kraken’s Legal Efforts Rejected
Kraken denied the SEC’s allegations and sought to dismiss the case earlier in 2023. However, the court rejected its motion in August, prompting Kraken to file for an appeal in September. The exchange argued that there were “substantial grounds for difference of opinion” on whether the Howey Test applies to cases without formal contracts or ongoing obligations.
Judge Orrick dismissed Kraken’s arguments, stating that no legal precedent supports their interpretation. He noted that multiple courts have already ruled against similar positions. Furthermore, Orrick emphasized the need for discovery to determine whether Kraken’s operations meet the Howey Test criteria.
SEC Strengthens Its Case
The SEC recently moved to dismiss several of Kraken’s defenses, arguing that they could lead to unnecessary and time-consuming discovery. Judge Orrick’s ruling aligns with this perspective, focusing attention on the core legal issues rather than peripheral arguments.
The lawsuit highlights specific crypto assets traded on Kraken, including ADA, MATIC, and SOL, which the SEC considers unregistered securities. This case reflects the regulator’s broader strategy to enforce compliance across crypto platforms.
Future Implications
Despite the legal setback, Kraken remains committed to its future plans, including the launch of its blockchain, “Ink,” in early 2025. The exchange has not yet issued a statement regarding the latest decision. As the case progresses through discovery, it continues to be a pivotal moment in the ongoing debate over cryptocurrency regulation.
