Kraken Must Respond to SEC Charges Within 20 Days

U.S. District Judge William H. Orrick has ordered Kraken, the prominent cryptocurrency exchange, to respond to SEC charges of securities law violations within 20 days.

The Securities and Exchange Commission (SEC) alleges that Kraken operates as an unregistered securities exchange, offering digital assets that it deems to be investment contracts, thus falling under securities laws.

This is part of SEC Chairman Gary Gensler’s broader crackdown on crypto platforms that allegedly fail to comply with existing securities regulations.

Kraken argues that digital tokens should not be classified as securities and that the SEC has no authority to regulate them. However, the court’s decision to pursue the case indicates that Kraken could face a protracted legal battle. This comes at a particularly difficult time for the exchange, which is seeking financial backing for a potential initial public offering.

The case highlights the inconsistencies in legal decisions regarding digital assets. While some courts, such as the one in Manhattan, have ruled that certain tokens (e.g., XRP) are not securities when sold publicly, other cases, such as those involving Terraform Labs and Coinbase, have sided with the SEC.