Kraken, which is facing several allegations brought by the Securities and Exchange Commission (SEC), is now seeking a jury trial in the lawsuit against it, according to a court filing on Thursday. The exchange also argued that the existing legal frameworks do not cover cryptocurrencies, thus they cannot be termed securities.
A Legal Pushback from Kraken
First reported by Coindesk, the legal representatives of the US-headquartered crypto exchange reiterated their denial of any illegal conduct, responding to each allegation and presenting 18 other defenses.
The SEC moved against Kraken last November, alleging that it had illegally operated an unregistered securities exchange, broker, dealer, and clearing agency. Furthermore, the exchange was accused of commingling customers’ money and crypto assets with its own.
However, Kraken denied the allegations multiple times and even asked the court to dismiss the lawsuit earlier.
Interestingly, Binance and Coinbase are also facing similar lawsuits brought by the SEC. However, Coinbase has not been accused of mixing customers’ funds with its own.
Questioning the Legality
Now, Kraken's defence is based on interpretations of the Securities Act and the Exchange Act, as neither includes digital assets. Kraken's lawyers argue that the exchange did not register because it was not required to do so under existing laws.
“Kraken did not violate Sections 5, 15(a) and 17A of the Securities Exchange Act of 1934 because ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL [...] are not securities or investment contracts,” the exchange noted in the motion filed in court. “The digital assets themselves cannot be investment contracts because they carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation.”
Kraken also accused the regulator of overstepping its authority, further adding that it took action against the crypto exchange without due process and fair notice.
“Due to the lack of clarity and fair notice regarding Kraken’s obligations under the law [...] Kraken lacked fair notice that its conduct was prohibited,” the filing added.
