The application came on Election Day when the U.S. Securities and Exchange Commission (SEC) sought to have the Northern District Court of California dismiss several fundamental antecedents of cryptocurrency exchange Kraken in an ongoing legal suit. The SEC claims that Kraken was given enough notice that offering specified crypto assets as “investment contracts” could violate securities laws.
Kraken’s legal team has criticized the timing of the filing, claiming the SEC only moved to prevent clients from listing all the evidence they have in discovery. Kraken’s lawyers say the SEC is seeking to avoid examining its arbitrary and irrational rules.
SEC to Go for the Throat of Kraken Over Failure to Comply with Securities Laws
The SEC’s filing mainly aims to invalidate Kraken’s arguments against it under the major questions doctrine and due process violations. The agency says that it provided Kraken with enough information that some of the virtual currencies offered by the platform are securities as per US legislation.
According to the SEC, Kraken’s defences should be dismissed because doing so will make the case more efficient by avoiding “re-litigation of settled issues.”
Michael O’Connor, Kraken’s attorney, described the SEC’s action as an “Election Day gambit,” similar to what the SEC did during the Ripple case. In an interview, O’Connor assured Kraken that it could hold its ground and that revelations showed the exchange was willing to fight the SEC on its securities law interpretation.
The lawsuit also illuminates more systemic regulatory ambiguity in the US. Kraken is seeking a jury trial, arguing over the SEC’s status of eleven digital assets, including Solana (SOL), Cardano ( ADA), and Polygon (MATIC), as securities.
It also cites frustration in attempts to register with the SEC, accusing Gensler of applying securities laws selectively. Election projections have brought back debate on how long Gensler has to serve in the position, with some believing that if there is a change of administration, he will resign before year-end.
Kraken lists crypto derivatives for Australian customers due to regulatory issues
During its ongoing legal struggle in the United States, Kraken has launched a set of crypto derivatives for qualified clients in Australia. This comes shortly after Kraken was dealt a blow in Australia when the Federal Court blocked offering its fiat margin trading product because of regulatory issues.
Still, the pro is that through Kraken’s new derivatives services, institutional clients can engage in cryptocurrency price volatility through futures contracts regardless of their ownership of the related instruments.
Kraken’s chief executive has also raised concerns about entrepreneurship regulatory systems in Australia, which he estimates to be complex. The exchange responded that the Federal Court’s ruling discusses the issues and concerns of crypto businesses and investors in the rapidly expanding market regulation.
While the general ownership rate for cryptocurrencies in Australia is 17%, higher than the global average of 15%, Kraken continues to work towards catering to institutional investors within this increasing crypto market in Australia.
This dual regulatory pressure in the U.S. and Australia reveals that Kraken has continuously been in a rough spot regarding regulatory compliance as the world adjusts to the underlying nature of digital assets.
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