SEC Accusations Misworded? Kraken Fights Back In Crypto Regulation Clash

Zinger Key Points
  • The SEC's response to Kraken's dismissal motion allegedly misuses key terms, undermining its regulatory accusations.
  • The ongoing legal dispute includes SEC's broad application of securities law, quoted as extending beyond "the obvious and commonplace."

In the ongoing legal skirmish between Kraken and the U.S. Securities and Exchange Commission (SEC), the cryptocurrency exchange has challenged the SEC's linguistic precision in a fresh legal brief.

What Happened: Kraken's defense, detailed in a response filed last Thursday, criticizes the SEC for not specifying the exact nature of the “investment contracts” involved in the activities on its platform, Bloomberg reported.

Instead, the SEC referred ambiguously to “investment concepts” and “ecosystems.”

Kraken’s legal contention highlights the SEC’s apparent lexical missteps in their April response to Kraken’s motion to dismiss the case.

The exchange argues that the SEC's failure to properly define the securities involved undermines the legitimacy of the regulatory body's accusations.

The SEC's own words from an earlier filing were invoked against it: "the words themselves do not delimit the security type because ‘the reach of the act does not stop with the obvious and commonplace'," a reference intended to underline the broad scope of regulatory reach, yet ironically pointing to the vague terminology used by the agency.

Also Read: Donald Trump Says ‘You Better Vote’ For Him If You’re Pro-Crypto: But Has He Always Been ‘Fine With It’?

The ongoing dispute with Kraken is part of a broader SEC initiative targeting major players in the cryptocurrency industry. Similar regulatory scrutiny has been applied to other key industry entities like Binance Holdings BNB/USD and Coinbase Global COIN.

Despite the aggressive regulatory stance, Kraken settled with the SEC on separate charges related to its staking services earlier in February 2023.

What’s Next: As industry stakeholders prepare for the Benzinga conference, the outcomes of cases like Kraken's may influence discussions on how digital asset companies navigate the complex web of U.S. securities laws.

The escalating regulatory scrutiny within the crypto industry underscores the themes that will be pivotal at the upcoming Benzinga Future of Digital Assets event on Nov. 19.

The event is set to delve deeply into the intersection of regulation and innovation within the digital assets space.

Insights from these legal battles are expected to be key topics at the event, offering attendees a clearer perspective on the future regulatory landscape for digital assets.

Read Next: House Challenges SEC Over Crypto Custody Rules, Biden Vows Blockade

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