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A California federal judge has rejected a bid by crypto exchange Kraken to appeal his decision to let the company’s lawsuit with the US Securities and Exchange Commission (SEC) proceed.
In a Nov. 18 order, Judge William Orrick dismissed Kraken’s motion for an interlocutory appeal. He stated that he determined the SEC has “adequately alleged” that the cryptocurrencies traded and sold on Kraken’s platform qualified as investment contracts under the Howey test and are therefore subject to securities laws.
Kraken Argues Cryptos On Its Platform Don’t Meet The Requirements Of The Howey Test
The Judge’s order comes after Kraken asked for permission to appeal the August rejection of its motion to dismiss. Kraken’s legal team argued that there was “substantial ground for difference of opinion” regarding securities laws which a higher court could answer to potentially resolve the case early.
Kraken also questioned whether an investment contract which has no contract or no post-sale obligations is in fact a violation of securities laws. Judge Orrick replied by saying that the exchange “has not cited a case since Howey” in which a court determined that contractual formalities or obligations post-sale were necessary to constitute an investment contract.
“Several courts have addressed these issues and disagreed with Kraken’s position,” Judge Orrick added.
SEC Says Kraken Just Wants To Engage In “Irrelevant And Burdensome Discovery”
Earlier this month, the SEC asked the court to dismiss three of Kraken’s defenses. The regulator contended that current regulations clearly define what an investment contract is and gave the exchange fair notice.
The SEC claimed that the defenses brought forward by Kraken are just an attempt to pursue “irrelevant and burdensome discovery under the pretense that the discovery somehow related to its due process defenses.”
The SEC coming after Kraken now.
The crime?
Being a crypto exchange.
This is the 2nd time this year – Kraken was already extorted for $30m in penalties by the SEC earlier this year.
They are trying to kill crypto in the U.S.
Absolute sham of a regulator. pic.twitter.com/w49hzx0MuQ
— RYAN SΞAN ADAMS – rsa.eth 🦄 (@RyanSAdams) November 20, 2023
Kraken was sued by the SEC in November last year, with the SEC accusing the company of failing to register as an exchange, broker, dealer and clearing agency.
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