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Crypto

Kraken Fights SEC on 'Investment Concept' Term, Amid Legal Woes

Kraken disputes SEC's broad securities law interpretation, challenging the agency's "investment concept" terminology in legal battle.

By Athena Xu

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5/10, 00:49 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Kraken challenges the SEC's wording in its legal battle, arguing the agency incorrectly used "investment concept" instead of "investment contract."
  • The SEC's April filing against Kraken for operating without registration is part of broader actions also involving Binance and Coinbase.
  • Despite ongoing disputes, Kraken settled with the SEC over separate staking business charges in February 2023.

Kraken Clashes with SEC

Kraken, a prominent crypto exchange, has escalated its dispute with the U.S. Securities and Exchange Commission (SEC) through a recent filing. The exchange is challenging the SEC's allegations, arguing that the agency's April letter inaccurately frames the case against it. Kraken's contention centers on the SEC's failure to specify any "investment contracts" involved in its operations, suggesting that the SEC's use of terms like "investment concept" and "ecosystem" lacks precision and relevance to the accusations.

SEC's Broad Interpretation

The SEC, in its defense, has leaned on a broader interpretation of securities law, citing case law to argue that the specific wording does not limit the scope of what constitutes a security. This approach underlines the SEC's stance that the regulatory framework's reach extends beyond traditional and easily identifiable securities. The agency's April filing emphasized that the language used does not confine the type of security, indicating a flexible application of the law to encompass various activities within the crypto space.

Legal Precedents and Charges

This legal skirmish is part of a broader regulatory crackdown on crypto exchanges by the SEC, which has similarly targeted other major players like Binance Holdings and Coinbase Global. The charges against Kraken, filed in November, accused the exchange of functioning as an unregistered broker, dealer, exchange, and clearing agency. This follows a separate settlement in February 2023, where Kraken resolved charges related to its staking business, brought forth by the SEC. These developments highlight the SEC's aggressive posture towards enforcing securities laws in the rapidly evolving cryptocurrency market.