The crypto exchange Kraken is opposing claims from the US Securities and Exchange Commission (SEC).
In November, the SEC accused Kraken of operating its crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency.
Earlier this year, Kraken filed a motion in U.S. District Court to dismiss these charges, and the company filed additional arguments in support of that motion on Thursday.
The exchange’s lawyers argue that the SEC’s argument would broaden the definition of investment contracts and expand the regulator’s jurisdiction beyond its delegated responsibility.
“When pressed to identify the securities in question, the SEC points to matters that Kraken does not trade, broker or settle and cannot trade. Rather than identifying an investment contract, the SEC asks the Court to accept an “investment concept” as sufficient. Instead of identifying a company, the SEC is asking the Court to accept an “ecosystem.” But Kraken does not trade, mediate or regulate ‘concepts’ or ‘ecosystems’.
The SEC never clearly states that what is actually traded, brokered and settled on Kraken itself is an investment contract. This failure highlights the fundamental problem with the SEC’s case. The only things claimed to be traded, brokered or settled on Kraken are digital assets – and those are not investment contracts.”
The SEC has argued that Kraken offered 11 different “crypto asset securities” on its platform and was legally required to register with the regulator.
“The Supreme Court’s decision in SEC v. WJ Howey Co. forces an opposite conclusion. The Howey Court defined an “investment contract” under the Securities Act and Exchange Act as “a contract, transaction or arrangement whereby a person invests his money in a common enterprise and is led to expect profit solely from the efforts of the promoter or a third party side.'”
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