San Francisco, Friday, August 30, 2024 – A federal judge has ruled that the US Securities and Exchange Commission’s (SEC) lawsuit against cryptocurrency exchange Kraken will proceed to trial.
The decision, issued on August 23 by US District Court Judge William H. Orrick, rejected Kraken’s motion to dismiss the case, allowing the SEC’s allegations to be fully examined in court.
The SEC initially filed its lawsuit against Kraken in November 2023 in the Northern District of California.
The agency accused Kraken of violating federal securities laws by failing to register as a broker, clearinghouse, or exchange.
The complaint seeks a permanent injunction against further violations, disgorgement of profits, and additional civil penalties.
Kraken is one of several major cryptocurrency exchanges facing legal action from the SEC. Similar lawsuits have been filed against Binance and Coinbase, with both exchanges also failing in their attempts to have the cases dismissed. Judge Orrick’s ruling marks another significant step in the SEC’s broader effort to regulate the cryptocurrency industry.
The Court stated that the SEC had “plausibly alleged” that some of the cryptocurrency transactions facilitated by Kraken could be considered investment contracts and, therefore, fall under securities laws.
Although the court agreed with Kraken that the cryptocurrencies themselves were not securities, he emphasized that the contracts surrounding their sale could still be subject to regulation.
Kraken expressed satisfaction with part of the ruling, noting that it confirmed Kraken’s stance that the tokens it trades are not securities. However, the decision does not absolve Kraken from facing trial on the broader allegations.
The case will proceed with both parties required to submit a joint statement by Oct. 8, outlining a proposed trial schedule.
