The crypto exchange Kraken is pushing back against claims made by the U.S. Securities and Exchange Commission (SEC).
In November, the SECย charged Kraken with operating its crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency.
Earlier this year, Kraken filed in US District Court to dismiss those charges, and the company provided additional arguments in support of that motion on Thursday.
The exchangeโs lawyers argue that the SECโs argument would widen the definition of investment contracts and expand the regulatorโs jurisdiction outside of its delegated responsibility.
โWhen pressed to identify the securities in question, the SEC points to things that Kraken does not and could not trade, broker, or settle. Instead of identifying an investment contract, the SEC asks the Court to accept an โinvestment conceptโ as sufficient. Instead of identifying an enterprise, the SEC asks the Court to accept an โecosystem.โ But Kraken does not trade, broker, or settle โconceptsโ or โecosystems.โ
The SEC never plainly alleges that what actually is traded, brokered, and settled on Kraken is itself an investment contract. This failure spotlights the fundamental problem with the SECโs case. The only things that are alleged to be traded, brokered, or settled on Kraken are digital assets โ which are not investment contracts.โ
The SEC has argued that Kraken hawked 11 different โcrypto asset securitiesโ on its platform and was required by law to register with the regulator.
โThe Supreme Courtโs decision in SEC v. W.J. Howey Co. compels a contrary conclusion. The Howey Court defined an โinvestment contractโ under the Securities Act and Exchange Act to mean โa contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.’โ
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