SEC Targets Kraken’s Defenses in Court, Says Crypto Exchange Had Fair Notice
The SEC claims that Kraken's "fair notice" defense is without merit. (Photo by Ferhat Deniz Fors on Unsplash)
Key Takeaways
- The SEC filed a motion to dismiss Kraken’s defenses in an ongoing lawsuit
- Kraken’s legal team argues that the SEC’s motion is an attempt to avoid discovery.
- The timing of the motion, coinciding with the US presidential election, raises suspicions.
On Nov. 6, the United States Securities and Exchange Commission (SEC) filed a motion seeking to dismiss two key defense arguments in its lawsuit against Kraken.
The agency aims to dismiss the exchange’s “fair notice” and “major questions doctrine” defenses, which it believes will streamline the discovery process and prevent Kraken from repeatedly re-litigating the same issues.
SEC Argues Kraken Was Warned
In 2022, the SEC filed a lawsuit against Kraken , alleging that the exchange offered crypto tokens that qualify as investment contracts without registering with the SEC.
Kraken has since maintained that it has not received fair notice from the regulator regarding the regulatory requirements for its offerings.
In its motion, the SEC argues that Kraken was given fair warning before the lawsuit was filed, as the agency had previously issued guidance on the regulatory requirements for crypto tokens.
“The Court should dismiss these defenses to help maintain the proper scope of discovery, narrow summary judgment, save judicial and party resources, and prevent Kraken from trying to re-litigate the same issues repeatedly at every possible stage of this case,” the SEC’s motion read.
The SEC claims that Kraken’s “fair notice” defense is without merit, as it was aware of the regulatory requirements before offering the tokens.
Trying to Avoid Scrutiny?
Kraken’s legal team, led by Michael O’Connor, was skeptical of the agency’s motion and viewed it as an attempt to avoid discovery of the agency’s “defective and inconsistent policies” and their impact on the American economy.
O’Connor questioned the motion’s timing, which coincides with the US presidential election, suggesting that the SEC may be trying to avoid scrutiny.
O’Connor took aim at the SEC’s string of failures, particularly its regulation-by-enforcement approach against crypto firms.
He pointed to the agency’s high-profile losses, including its ordeal with Ripple, where the commission “failed on a similar motion.”
This failure, O’Connor implies, is just one example of the SEC’s defective approach, which has led to widespread uncertainty and confusion in the crypto industry.
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