- SEC claimed that Kraken failed to register as a broker, clearinghouse, or exchange.
- Kraken said that the SEC failed to adhere to the standards established by the Howey Test.
On Thursday, Kraken filed a motion to dismiss the case, claiming that the U.S SEC had not charged fraud and had instead stretched the meaning of a contract in its lawsuit.
With the argument that cryptocurrencies—or at least those included in the SEC’s complaint—should be classified as commodities rather than securities, the crypto exchange sought to dismiss the SEC’s case that had been filed in the Northern District of California.
Multiple Claims by SEC
Last November, after months of settlements related to Kraken’s previous staking service, the SEC filed a lawsuit against the firm, claiming it failed to register as a broker, clearinghouse, or exchange and that it mixed consumer and corporate assets.
The motion stated:
“The SEC does not allege fraud. The SEC does not allege consumer harm. The SEC’s sole claims are that Kraken has somehow operated in plain sight for almost a decade as an unregistered securities exchange, broker-dealer, and clearing agency, in violation of the Exchange Act.”
The argument that comic books and baseball cards may be investments but are not investment contracts is based on previous arguments made in current cases and is part of Kraken’s motion. The motion states that none of the cryptocurrencies included in the SEC complaint constitute assets or investment contracts, since the agency did not “plausibly allege” this.
In its case, Kraken said that the SEC failed to adhere to the standards established by the Howey Test, a benchmark to determine securities established by a Supreme Court ruling. Additionally, it drew parallels between the digital assets bitcoin and ether, which are being traded as derivatives, and the cryptocurrencies included in the SEC’s lawsuit.
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