Kraken files to dismiss SEC suit — ‘dangerous precedent’ for overreach

Crypto exchange Kraken has filed to dismiss a November lawsuit from the Securities and Exchange Commission, arguing it sets a “dangerous precedent” for the agency’s remit.

The SEC lawsuit alleged the exchange commingled customer funds and failed to register as a securities exchange, broker, dealer and clearing agencywith Kraken filing its motion to dismiss the suit on Feb. 22.

In an accompanying blog post, the crypto exchange stated:

“The SEC’s theory is that there can be an investment contract with no contract, no post-sale obligations and no interaction at all between the issuer and the purchaser.”

It added the agency’s theory means it “has no limiting principle” and would grant the SEC “boundless authority over commerce and potentially open up the floodgates to private securities law claims.”

“It would turn a broad range of ordinary assets or commodities, like sports memorabilia, trading cards, expensive watches, or even diamonds, into securities.”

The SEC sued Kraken last year, alleging it had “made millions of dollars unlawfully facilitating the buying and selling of crypto asset securities” and “intertwines the traditional services of an exchange, broker, dealer, and clearing agency without having registered any of those functions with the Commission as required by law.”

In February 2023, Kraken reached a $30 million settlement with the SEC and agreed to cease offering crypto-staking products and services to United States customers.

This is a developing story, and further information will be added as it becomes available.