Kraken vigorously refutes the allegations made by the Securities and Exchange Commission (SEC), arguing that the agency’s regulatory scope is excessive and federal securities law is unclear.
Kraken, a centralized cryptocurrency exchange, is reacting to the United States Securities and Exchange Commission (SEC) charge that it violated federal securities laws.
The SEC claimed that the crypto exchange provides a variety of digital assets that constitute as unregistered securities.
Kraken strongly refutes the allegations in its legal filing response, asserting that the assets in question do not satisfy the legal definition of securities under US law.
The assertion that digital assets, such as Cardano (ADA), Algorand (ALGO), Cosmos (ATOM), and others traded on Kraken, are not investment contracts is the foundation of the exchange’s defence.
Kraken did not violate Sections 5, 15(a), and 17A of the Securities Exchange Act of 1934, as ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL are not securities or investment contracts.
Kraken references the SEC v. W.J. Howey Co. judgement in its filing, a significant Supreme Court case that establishes the criteria for defining an investment contract.
The exchange contends that the SEC did not establish that the digital assets in issue satisfy the criteria enumerated in the Howey test, and as a result, they do not fall within the SEC’s jurisdiction.
Kraken also refuted the SEC’s assertions in the filing, criticising the regulator’s methods of regulating the crypto industry.
Kraken’s digital asset trading platform is not subject to regulation by the Securities and Exchange Commission (SEC) due to the fact that the Digital Assets are not securities or investment contracts.
The exchange maintains that the agency has exceeded its authority and contends that the SEC’s interpretation of securities laws regarding digital assets is unclear.
“Kraken was not provided with adequate notice that its actions were unlawful due to the absence of clarity and equitable notice regarding its legal obligations.”
Stuart Alderoty and Paul Grewal, the chief legal officers of Ripple and Coinbase, respectively, have criticized the SEC for the regulator’s evident contradictions.
Alderoty attacked the regulator for its stance on “crypto asset securities,” which he characterized as a term that the SEC had essentially devised in a “twisted pretzel of contradictions.”
Grewal criticised the SEC for its allegations against XRP, asserting that the regulatory body had “essentially alleged XRP itself is a security” in its 2020 complaint against “Ripple et al.”
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