US District Judge William H. Orrick has ruled that cryptocurrency exchange Kraken must face a lawsuit filed by the Securities and Exchange Commission (SEC). The SEC accuses Kraken of operating an unregistered securities exchange, a charge that carries substantial regulatory implications.
Judge Orrick stated in his opinion, “The SEC has plausibly alleged that at least some of the cryptocurrency transactions that Kraken facilitates on its network constitute investment contracts, and therefore securities, and are accordingly subject to securities laws.” This ruling highlights the SEC’s stance that many digital assets fall under the purview of securities regulations, requiring platforms like Kraken to register with the agency.
The decision comes after Kraken had requested the judge to dismiss the SEC’s case, which was initially filed in November. This development also follows reports that Kraken, one of the pioneers in the cryptocurrency exchange space, was exploring options for raising additional capital, potentially leading to an initial public offering.
Under the leadership of Chair Gary Gensler, the SEC has taken a firm stance on the regulation of cryptocurrencies, asserting that most digital tokens are unregistered securities and should be subject to the SEC’s oversight. Gensler has been vocal in his criticism of crypto exchanges and the broader digital-asset industry for alleged non-compliance with securities laws.
