Judge Denies Kraken’s Appeal, SEC Lawsuit Moves Forward

A federal judge recently denied Kraken’s request to appeal a ruling that allows the U.S. Securities and Exchange Commission (SEC) lawsuit to move forward, emphasizing that an appeal would only delay the process.

In his order dated November 18, Judge William Orrick dismissed Kraken’s motion for interlocutory appeal, agreeing with the SEC’s stance that the crypto assets traded on the platform qualify as investment contracts under the Howey test, thus falling under securities laws.

Orrick noted that the SEC had sufficiently presented its case, and any appeal would not expedite the ultimate resolution of the matter. “Only through discovery will it be clear if Kraken’s activities truly meet all the criteria of the Howey test,” he stated.

Kraken had sought permission to appeal the August decision that denied its motion to dismiss the SEC’s case, arguing that there were important legal questions about how investment contracts are defined under U.S. law.

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Specifically, Kraken questioned whether a lack of formal agreements or post-sale obligations could still constitute a violation of securities laws. However, Judge Orrick disagreed, pointing out that Kraken’s position had been previously addressed by several courts, all of which had rejected it.

This ruling comes after the SEC’s push to dismiss certain defenses raised by Kraken, claiming they were irrelevant and intended to complicate the discovery process. The SEC’s lawsuit, filed in November 2023, accuses Kraken of operating as an unregistered exchange, broker, dealer, and clearing agency.

Kostadin Dimitrov