A California judge denied Kraken’s move to dismiss an SEC lawsuit and found the Commission’s crypto-securities argument acceptable.
On Aug. 23, U.S. District Judge William H. Orrick ruled that the crypto exchange Kraken must face a Securities and Exchange Commission lawsuit alleging securities violations. The SEC’s complaint, filed in November 2023, claimed that some blockchain transactions executed on Kraken’s platform qualify as investment contracts under the Howey Test.
Judge Orrick deemed this assertion plausible, finding merit in the agency’s argument that cryptocurrencies, including Cardano (ADA), Polygon (MATIC), and Solana (SOL), likely fall under the purview of federal securities laws.
Crypto proponents previously celebrated Solana’s removal from the SEC’s complaint against Binance, viewing the outcome as a positive for SOL and other altcoins.
The San Francisco federal court delivered its opinion nearly four months after Kraken filed to dismiss the suit, citing incorrect wording. Kraken reportedly mulled an initial public offering and another fundraiser after its May motion to dismiss.
SEC largely anti-crypto under Gensler
Crypto stakeholders accuse the SEC, under chair Gary Gensler, of adopting a hostile approach to digital assets. Blockchain service providers argue that the regulator denies the industry clear policies and registration guidelines.
Gensler and the SEC dismiss the so-called “regulation by enforcement” crypto chorus, rebuffing businesses and players for ignoring securities laws.
According to Gensler, the digital asset ecosystem needs to be more compliant. Based on this stance, the SEC has issued suits against several major entities, including Binance, Coinbase, Kraken, and Ripple.
Despite partial losses against Ripple over XRP retail sales, SEC cases against crypto giants have proceeded in court. Many Web3 community members believe the SEC and other three-letter agencies are enforcing “Operation Choke Point 2.0,” a plan by President Joe Biden’s administration to remove crypto from America’s financial system.