A California Federal Judge has rejected Kraken’s attempt to appeal the Sec lawsuit. In a November 18th ruling, The federal court in California sided with the SEC, allowing the case to move forward immediately.
Federal Court Sides With SEC; Another Blow For Crypto Exchanges
According to official court documents, The federal court in California denied cryptocurrency exchange Kraken’s request to appeal its ruling for a lawsuit brought by the US Securities and Exchange Commission to proceed, stating that doing so “would only delay resolution.”
In a November 18 ruling rejecting Kraken’s petition for interlocutory appeal, Judge William Orrick concluded that the SEC had “adequately alleged” that the cryptocurrency exchanged and sold on Kraken qualified as investment contracts for the purposes of the Howey test and securities laws.
The decision marks another disadvantage for the crypto exchange given SEC’s tries to keep dominance and watch over the crypto sector.
Kraken vs. the SEC: What Was The Case?
Back in 2023, the Securities and Exchange Commission had accused Payward Inc. and Payward Ventures Inc., collectively referred to as Kraken, of running Kraken’s cryptocurrency trading platform as an unregistered clearing agency, broker, dealer, and securities exchange.
The SEC complaint stated that Kraken had illegally facilitated the purchase and sale of crypto asset securities, generating hundreds of millions of dollars since at least September 2018.
Kraken was also accused by the SEC of combining the conventional services of an exchange, broker, dealer, and clearing agency without legally registering any of those activities with the Commission.
The regulator had claimed that due to Kraken’s purported failure to register these operations, investors had been denied important protections, such as SEC inspection, recordkeeping obligations, and conflict of interest protections.
Judge’s Previous Ruling For Kraken
Previously in August of 2024, Kraken had requested for dismissal of the SEC case to which a judge had decided that the cryptocurrency platform Kraken must deal with a complaint brought by the US Securities and Exchange Commission.
The federal court in San Francisco with Judge William H. Orrick stated that the SEC had “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.”
SEC’s Aversion To Crypto World
The Kraken case is not the only time that the SEC has sued a crypto firm. Almost all big names in crypto have had to deal with SEC’s court cases and investigations. Previously, The SEC was sued by Crypto.com for allegedly overstepping its authority by regulating the cryptocurrency sector. According to the lawsuit, the SEC illegally broadened its purview by designating almost all cryptocurrency holdings as securities.
Also, SEC chair Gensler has a long-standing love-hate relationship with the cryptocurrency world since the SEC has been so insistent about not recognizing digital assets. Be it Ripple or Coinbase, almost all big names in the industry have faced issues with the SEC at some or the other points.