A judge shot down Kraken’s request to dismiss claims made by the U.S. Securities and Exchange Commission (SEC) alleging the exchange violated securities laws.
Last November, the SEC charged Kraken with operating its crypto trading platform as an unregistered securities exchange, broker, dealer and clearing agency.
Earlier this year, Krakenfiled in US District Court to dismiss those charges, positing that the SEC’s claims would widen the definition of investment contracts and expand the regulator’s jurisdiction outside of its delegated responsibility.
On Friday, US District Judge William H. Orrick denied the exchange’s request, ruling that the SEC “plausibly alleged that at least some of the cryptocurrency transactions that Kraken facilitates on its network constitute investment contracts, and therefore securities, and are accordingly subject to securities laws.”
The SEC argues that Kraken hawked more than 11 different “crypto asset securities” on its platform and was required by law to register with the regulator.
Those alleged securities include Cardano (ADA), Algorand (ALGO), Cosmos (ATOM), Filecoin (FIL), Flow (FLOW), Internet Computer (ICP), Decentraland (MANA), Polygon (MATIC), Near Protocol (NEAR), OMG Network (OMG) and Solana (SOL).
Judge Orrick notes that the SEC just needed to plausibly allege at least one of those crypto assets was an investment contract to move forward with the lawsuit, so he just focused on Solana and Algorand in his ruling, outlining descriptions of both projects provided on Kraken’s website.
Explains Orrick,
“The SEC has plausibly alleged that investors in crypto assets offered on Kraken possessed an expectation of profits from the efforts of others that they derived from the promoters’ representations that Kraken republished and reasserted on its platform. Whether or not the record ultimately supports that allegation will be revealed through discovery.”
The judge also said a proposed case schedule and trial date will be filed in October.
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