Main points
- U.S. District Judge rejects Kraken appeals court order allowing SEC lawsuit to proceed.
- Cryptocurrency exchange Kraken has sought license Appeal the court’s denial of the SEC’s motion to dismiss the case.
- Judge William Orrick said the appeal would delay resolution, Noting that the SEC’s allegations against Kraken are compelling.
Judge dismisses Kraken’s appeal
California District Court Judge William Orrick denied Kraken’s motion to appeal its decision in the case to the Securities and Exchange Commission.
in a OrderJudge Orrick denied the cryptocurrency exchange’s interlocutory appeal motion. He said the SEC “fully charged” Cryptoassets traded on exchanges are investment contracts subject to U.S. securities laws.
U.S. Securities and Exchange Commission sued In November 2023, the cryptocurrency exchange Kraken went online. Regulators say cryptocurrency trading platform failed to register as an exchange, dealer, broker and clearing agency. The SEC also claims that most cryptoassets offered on the platform qualify as investment contracts.
Meanwhile, Kraken Make a motion The district court dismissed the charges in August. In September, Kraken filed a motion seeking leave to appeal August court order Denied its motion to dismiss.
It said there were “good reasons” to delay the securities law opinion, which the high court could respond to and potentially end the proceedings early.
Additionally, Kraken said it needs to know whether investment contracts without contractual or post-sale obligations violate securities laws. It also raises questions about whether Howey needs to invest in the business..
Judge says SEC securities violations charges against Kraken are justified
Justice Orrick, however, disagreed with these reasons. According to the judge, Kraken has not cited any cases since its inception Under the Howey test, courts have determined that investment contracts require post-sale obligations or contractual formalities.
The judge also noted that many courts have addressed these issues but disagreed with Kraken.
Orrick noted that the SEC convincingly claimed that cryptocurrencies traded on Kraken constituted investment contracts. However, only discovery will determine whether Kraken’s sales actually meet Howey’s claims. He therefore ordered the proceedings to proceed.
“Fundamentally, I do not believe that certification would materially facilitate the ultimate termination of the litigation,” the judge wrote. “While the SEC plausibly asserts its theory of securities violations against Kraken, only an investigation can determine the sales, transactions, and actions on Kraken.” Does the exchange really tick all the boxes for Howey?”
The ruling comes after the SEC sports Requesting the Court to Dismiss Kraken’s Fair Notice Defense and Two Other Key Arguments. The Commission believes that existing law already defines securities contracts, which constitutes sufficient fair notice to cryptocurrency exchanges.
The SEC claims Kraken will seek onerous and irrelevant discovery, claiming the findings are relevant to its due process defense. Kraken, meanwhile, has yet to respond to a request for comment on the latest developments.
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