The United States Securities and Exchange Commission has submitted a request to the Northern District Court of California to dismiss three key defenses presented by Kraken in response to allegations of unlawful conduct. In a motion filed on November 5, the regulatory body rejected Kraken's arguments regarding the lack of clarity surrounding securities laws and their application to virtual assets, as well as claims that the exchange was not provided with fair notice that its actions were deemed to be in violation of securities law. The SEC is also seeking to have the court reject Kraken's defense based on the 'major questions doctrine', a legal principle established by the Supreme Court that stipulates agencies should not expand their regulatory authority without explicit congressional authorization. The SEC initially sued Kraken in November 2023 for operating an unregistered securities exchange, broker, dealer, and clearing agency, alleging that the exchange had unlawfully generated hundreds of millions of dollars since at least September 2018 by facilitating the purchase and sale of crypto asset securities.
Kraken's motion to have the case dismissed was rejected in August. The SEC's motion states, 'When denying Kraken's motion to dismiss, this Court rejected Kraken's assertion that the major questions doctrine foreclosed this action and also determined that the definition of 'investment contract' under the Securities Exchange Act of 1934 is well-settled law.' Furthermore, Kraken has 'now propounded numerous discovery requests seeking voluminous sets of documents and sprawling admissions related to these legally unsupportable defenses', according to the filing. The SEC argues that 'The Court should dismiss these defenses to help maintain the proper scope of discovery, narrow summary judgment, save judicial and party resources, and prevent Kraken from trying to re-litigate the same issues repeatedly at every possible stage of this case.'