Kraken’s lawyer, Matthew Solomon, challenged the SEC’s approach of treating the exchange as a unified “ecosystem” with all tokens as investment contracts. He stressed the fair, consistent application of regulations to crypto assets.
By Bena Ilyas
Updated
2 mins read
The legal battle between the US Securities and Exchange Commission (SEC) and crypto exchange Kraken took a significant turn on June 20, 2024. During a hearing in the U.S. District Court for the Northern District of California, Judge William Orrick hinted at denying Kraken’s motion to dismiss the case. This suggests the court may be inclined to view certain digital assets on the exchange as securities.
Both parties presented opposing arguments at the hearing. Kraken’s lawyer, Matthew Solomon, argued against the SEC’s approach of treating the exchange as a unified “ecosystem” where all tokens are bundled as investment contracts. He emphasized the need for the fair and consistent application of existing regulations to crypto assets, just like any other financial product.
The SEC, represented by Peter Moores, presented a contrasting viewpoint. Their argument hinged on classifying tokens as “concepts” within the Kraken ecosystem, potentially qualifying them as securities under the Howey Test, a legal framework for identifying investment contracts.
Solomon further distinguished Kraken’s case from previous SEC actions against Terraform Labs and Telegram. He also referenced Judge Analisa Torres’ decision in the SEC’s case versus Ripple Labs. While the Ripple case saw XRP tokens classified as securities for institutional investors, Solomon suggested a closer comparison lies with cryptocurrency exchange Coinbase.
While Judge Orrick didn’t make a final ruling on the motion to dismiss, his inclination towards denying it suggests the case will proceed. He estimated a year for the discovery phase, a crucial period for both parties to gather evidence.
Although not directly involved in the SEC v. Kraken case, Ethereum (ETH price data) is still a major focus in the ongoing regulatory conflict. Earlier reports hinted at the SEC’s consideration of categorizing ETH as a security, which could lead to enforcement actions against companies dealing with the token.
A recent development in this context is the SEC’s closure of its investigation into Consensys, a blockchain firm that had sued the commission regarding a possible enforcement action concerning ETH. This development raises questions about the SEC’s current stance on classifying Ethereum.
With the potential classification of certain digital assets as securities, the industry might face stricter regulations and increased scrutiny. The uncertainty could impact investor confidence and hinder the cryptocurrency market’s growth.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
With over 3 years of crypto writing experience, Bena strives to make crypto, blockchain, Web3, and fintech accessible to all. Beyond cryptocurrencies, Bena also enjoys reading books in her spare time.
