Kraken Pushes for Jury Trial in SEC Lawsuit, Rails Against 'Crypto Asset Securities' Claims

Kraken has formally responded to the SEC’s lawsuit, denying allegations of operating as an unregistered securities exchange.

In a new court filing, Kraken demanded a jury trial and argued against the SEC’s classification of 11 crypto assets as so-called “crypto asset securities.”

The 11 assets include Solana (SOL), Cardano (ADA), Algorand (ALGO), Cosmos Hub (ATOM), Filecoin (FIL), Flow (FLOW), Internet Computer (ICP), Decentraland (MANA), Polygon (MATIC), NEAR Protocol (NEAR), and OMG Network (OMG).

The exchange’s chief legal officer, Marco Santori, stressed that a court had already dismissed the SEC’s attempt to classify these tokens as securities, arguing that they don’t meet the legal criteria. He was referring to a ruling by a Northern California judge last month that allowed the lawsuit to proceed, but cast doubt on whether the aforementioned assets are actually securities.

“Fundamentally, the court in Kraken’s case made the same distinction as in the Ripple case: A token isn’t a security, but agreements around a token could be,” Santori said on Twitter at the time.

Kraken also argued that its platform has operated since 2013 without any prior warning from the SEC that its activities were illegal. The lack of clear regulatory guidance, the exchange’s attorneys wrote, has contributed to this legal clash.

The company cited in its new filing that in 2021, SEC Chair Gary Gensler admitted that no regulatory framework for crypto exchanges existed within the SEC’s purview.

Kraken also criticized the SEC’s lack of transparency during the investigation, noting that the commission failed to specify which transactions were illegal, in its filing.

Kraken further accused the SEC of blocking efforts to register or cooperate, stating that attempts to align with regulations were "stonewalled" by inconsistent rulings and guidance.

This all comes after a federal judge in California ruled last month that the SEC lawsuit against Kraken can move forward.

This case isn’t Kraken’s first run-in with the SEC, having previously faced litigation over its crypto staking services. That case ended with Kraken agreeing to pay a $30 million fine and having to cease offering its staking services to U.S. customers.

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Meanwhile, on the same day Kraken filed its response, the SEC posted a tweet warning about scams involving “crypto asset securities,” stating that scammers often use new technologies to deceive investors.

Edited by Stacy Elliott.