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Kraken, one of the oldest cryptocurrency exchanges, faces the ongoing scrutiny of the U.S. Securities and Exchange Commission (SEC). The SEC has accused Kraken of operating as an unregistered securities exchange, a claim that a federal judge has recently upheld.
The question now is, what does the future of digital assets look like in the hands of these regulatory agencies?
Kraken’s legal troubles began in November 2023 when the SEC filed a lawsuit against the exchange, accusing it of facilitating unregistered securities transactions.
The SEC, led by Chair Gary Gensler, has been particularly aggressive in its stance that most digital tokens qualify as securities and, thus, fall under its regulatory jurisdiction.
Like many other crypto platforms, Kraken argued that the SEC’s reach should not extend to digital assets, contending that the agency was overstepping its authority.
However, U.S. District Judge William H. Orrick recently ruled against Kraken’sy motion to dismiss the lawsuit.
In his opinion, Judge Orrick stated that the SEC had “plausibly alleged” that some of the cryptocurrency transactions Kraken facilitates could be considered investment contracts, making them subject to securities laws.
This decision is a critical blow to Kraken, which had positioned itself as a staunch defender against what it views as regulatory overreach.
The SEC’s lawsuit also accused Kraken of mishandling customer assets, including co-mingling them with its own and failing to protect customer information adequately.
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