Kraken Demands Jury Trial After SEC Admits Crypto Asset Security Definition Faults
Kraken is taking the fight to the SEC, which could have far-reaching implications for the crypto industry. (Photo by Spencer Weiner-Pool/Getty Images)
Key Takeaways
- Kraken has demanded a jury trial against the SEC.
- Kraken argued in its court filing that crypto tokens are digital assets and don’t violate securities law.
- On the same day, the SEC also admitted that ten crypto tokens mentioned in the Binance lawsuit are not securities.
Popular crypto exchange Kraken is demanding a jury trial in its high-stakes showdown with the Securities and Exchange Commission.
The request follows a federal judge’s ruling that the SEC’s lawsuit against Kraken will proceed to trial. It also coincides with the SEC’s recent concession, in which the agency acknowledged that using the term “crypto asset security” has invited a lot of “confusion.”
Kraken’s Battle Can Win a War for Crypto Industry
Kraken is taking the fight to the SEC, which could have far-reaching implications for the crypto industry.
In a court filing dated Sept. 12 , the crypto exchange argued that federal securities law does not mention digital assets, and therefore, the exchange did not feel obligated to register with the regulator.
Kraken also claimed that digital assets cannot be deemed investment contracts because they do not carry the same rights and obligations as traditional financial assets.
“They carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation,” Kraken argued.
The exchange’s plea comes as the SEC’s regulatory squeeze on the crypto industry reaches a fever pitch, as evidenced by its recent lawsuits against major U.S. exchanges, including Kraken, Coinbase, and Binance, alleging violations of securities laws.
The SEC’s central argument is that these sales constitute securities transactions, and therefore, the exchanges must register as securities brokers with the agency. This would require strict compliance with regulations and oversight.
However, recent rulings have cast doubt on the SEC’s interpretation of securities laws.
Particularly, the XRP ruling determined that selling XRP to retail customers does not violate securities law. Additionally, the SEC’s amended complaint in the Binance suit has shifted the debate.
The agency admitted that its use of the term “crypto asset security” was merely shorthand – not a blanket categorization of all crypto assets as securities. The SEC’s amended complaint also acknowledged that the ten crypto tokens mentioned in the Binance lawsuit do not qualify as securities.
Changing Security Debate in the U.S.
If Kraken is successful, it could set a precedent for other exchanges and challenge the SEC’s authority over the crypto space.
Alternatively, if the SEC wins, it could lead to stricter regulations and oversight for the industry.
The crypto industry has long demanded clearer regulations and guidance from the SEC.
The agency’s admission in the Binance case could play a pivotal role in the jury trial, potentially changing the crypto as a security debate in the US.
