A California federal judge narrowed down on Kraken’s defense in the crucial lawsuit launched by the US Securities and Exchange Commission (SEC). However, it also dismissed some of the watchdog’s transformative claims, giving out a partial decision.
The commission had sued Kraken back in November 2023, alleging that the crypto exchange violated federal securities laws. The company failed to register with the agency as a broker or exchange. Ripple’s Chief Legal Officer has criticized SEC lawyers for playing “old games” after a federal judge scolded the agency in the Kraken case.
Ripple’s Alderoty slams SEC tactics
Stuart Alderoty, CLO at Ripple, in an X post, highlighted that some SEC lawyers are still initiating old games which earned them another admonishment from a federal judge. He added that such sorts of conduct need to be ended swiftly or it can risk chipping away at the efforts of the commission’s Crypto 2.0.
Alderoty shared the note added by the judge in the Kraken case. It suggests that the SEC is referring to the assets as the “Kraken-Traded Securities” in the case. The judge mentioned that he made it clear in the last order that they would not entertain any theory of liability wherein the commission asks the court to treat the crypto assets themselves as though they are securities.
The note added that the judge considers the theory that those crypto assets involved were once sold/traded/exchanged on the Kraken Trading Platform. It added that these assets are investment contracts that form the basis for securities. Meanwhile, the judge even warned the SEC to be careful of this distinction.
SEC’s action with crypto platforms
The legal battle between Kraken and SEC proceeded to go to trial after the exchange’s appeal. The commission believes that Kraken made a business decision to reap hundreds of millions of dollars from investors but it didn’t come into compliance with the securities laws. Gurbir Grewal, a former director of the SEC’s Division of Enforcement, stated that the decision has resulted in a business model rife with conflicts of interest that placed investors’ funds at risk.”
Kraken even agreed to cease offering or selling securities through its staking services or programs and paid a civil penalty of $30 million. This case stands no unique as the watchdog has launched similar lawsuits against Coinbase, Gemini, Binance, Uniswap, and more. These platforms have been accused of selling unregistered securities in one way or another.
Commissioner Peirce had criticized the commission’s decision to take crypto-linked enforcement actions without issuing required guidance. She mentioned the Kraken case and stated that instead of taking the path of thinking through staking programs, the SEC again chose to speak through legal actions.
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