Kraken, the largest cryptocurrency exchange, has filed a lawsuit against the Securities and Exchange Commission because it believes that continuing the case would set a “dangerous precedent.”
Kraken filed the lawsuit against the SEC in November. That same month, the Securities and Exchange Commission (SEC) alleged that the exchange’s parent companies used Kraken’s cryptocurrency trading platform, which was not registered as a securities exchange, broker, dealer and clearing agency. The SEC similarly filed a lawsuit against Coinbase.
In a blog post, the company wrote: “Today we filed a motion with the Court to dismiss the SEC’s lawsuit against Kraken.” The SEC’s complaint did not mention fraud or harm to consumers. The SEC’s primary argument was that Kraken operates as an unlicensed securities exchange, broker, dealer and clearing agency, as crypto tokens are considered “investment contracts.” From a legal standpoint, the SEC’s claims are false, even if many of the allegations in the complaint were true.
Kraken said that allowing the case to proceed would set a “dangerous precedent for excessive agency action.” The exchange stresses that the SEC never discloses any “agreement” between buyers and issuers of Kraken tokens; therefore, there is no question of an “investment agreement.”
The company denies the SEC’s claims, saying it will vigorously defend its position. According to the SEC’s complaint, “since at least September 2018. Kraken has earned hundreds of millions of dollars by unlawfully facilitating the buying and selling of crypto asset securities.”
The commission is seeking injunctive relief, a conduct-based order, interest and penalties for the fraudulent profits. However, it also revealed that it paid Kraken $30 million in February. It added that the exchange has agreed to stop offering or selling securities through crypto asset staking services or programs, as recommended by the Securities Commission.
In November, the co-founder of cryptocurrency exchange Kraken, Jesse Powell, claimed that US authorities are masochists who attack the country and extortionists who remove companies in the sector from the country. Powell accused federal regulators, especially the SEC. The exchange claims that the SEC has made it difficult for cryptocurrency companies to register and has imposed unclear rules.