Kraken’s Arguments
Kraken, a major cryptocurrency exchange, is disputing accusations by the U.S. Securities and Exchange Commission (SEC). The SEC claims that Kraken operated as an unregistered securities broker, dealer, and clearing agency.
Kraken argues that the SEC’s definition of investment contracts is too broad and would give the agency excessive authority. The exchange’s lawyers contend that the SEC has not identified any specific investment contracts that Kraken traded or brokered.
SEC’s Position
The SEC alleges that Kraken offered 11 different “crypto asset securities” on its platform without registering with the agency. The SEC argues that these assets meet the definition of investment contracts under the Securities Act and Exchange Act.
Legal Precedent
Kraken cites the Supreme Court’s decision in SEC v. W.J. Howey Co. to support its argument. The Howey Court defined an investment contract as “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”
Kraken contends that the digital assets traded on its platform do not meet this definition because investors do not rely on Kraken’s efforts for profits.
