In a blow to the United States Securities and Exchange Commission (SEC), Kraken, the second largest cryptocurrency exchange in the US, has fired back at the agency regarding its lawsuit against the platform, citing a crucial aspect of Ripple’s case.
Kraken Responds to The US SEC
Bill Morgan, a legal expert, shared the information concerning the lawsuit on the social media platform X (formerly Twitter) on Friday. “It is interesting how Kraken summarises and references a significant portion of the Ripple case,” Morgan stated.
Morgan highlighted that Kraken bases its stance on the claim that the SEC has not been able to develop a direct connection between the issuers of certain coins, which the commission calls “crypto asset securities.”
According to the summary of the SEC v. Ripple document that Kraken cited, there is no relationship between the issuer and the buyer. Furthermore, it points out five reasons that demonstrate this lack of connection, with one of those grounds being that particular lack of expectation of income from Ripple’s effort, as noted by Judge Analisa Torres.
Specifically, Kraken’s position refutes the SEC’s contention that assets like Algorand (ALGO), Cardano (ADA), and Polygon (MATIC) that are sold on the crypto exchange and its customers are securities.
Thus, Kraken, drawing a comparison to the Ripple case, argues that the 11 token issuers involved in the case, which the agency calls “crypto asset securities,” do not align with the typical requirement of an investment contract.
The platform generally adopts a blind bid/ask trading mechanism akin to that of Ripple’s programmatic sales, which Judge Analisa Torres deemed were not investment contracts. A portion of those Ripple programmatic sales took place on the crypto exchange.
So far, Morgan has emphasized how the ruling in the Ripple case might make it harder for the Commission to conclude the current legal dispute with Ripple.
“Massive impediment to a settlement of the SEC vs. Ripple case,” he stated.”You can see the problem for the SEC if Judge Torres’ summary judgment decision stands and is not successfully appealed,” Morgan added.
Crypto Exchange Files A Motion Of Dismissal
A recent report from Fox Business reporter Eleanor Terret revealed that Kraken has taken a pivotal step in the legal dispute by filing a motion of dismissal regarding the SEC’s claims.
The exchange has asked the Northern California Court to dismiss the Commission’s assertion that it functions as an unregistered securities platform, dealer, broker, and clearing agency.
Terret noted that a spokesperson from Kraken told Fox Business that the foundation of the SEC’s case relies on a “comprehensive new theory.” This would effectively “securitize” a variety of common commodities and assets. Furthermore, the spokesperson asserted that the regulatory watchdog currently considers any asset that “rises or falls in value” as an investment contract.
Consequently, this action would allow the SEC to seize vast new power over the US economy, coinciding with Congress discussing how those powers should be distributed among government agencies.