(Nikhilesh De/CoinDesk)
Crypto exchange Kraken filed a motion to dismiss the lawsuit it faces by the U.S. Securities and Exchange Commission.
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The U.S. Securities and Exchange Commission didn’t allege actual fraud or harms to Kraken’s consumers, the exchange argued in a motion to dismiss the lawsuit it faces.
This is one of multiple lawsuits the sector is observing, consisting of those against Coinbase and Binance.US, in addition to a new entrant hoping to attain a positive verdict in a specific district. All these lawsuits share a common basis: How should the SEC supervise the crypto sector and are its present actions reasonable?
A portion of the Kraken motion to dismiss revisits very familiar terrain: The SEC hasn’t satisfactorily established that any of the named assets are securities, it’s extending the definition of an “investment contract” beyond acceptable limits, and it’s exceeding its jurisdiction.
Some aspects are somewhat more unique: Kraken cited the SEC’s claims that the exchange actively promoted the cited digital assets, without delving into that deeply. Moreover, the exchange stated that the SEC hadn’t claimed any direct harm to consumers, but didn’t explicitly address the SEC’s allegations of commingling.
Regardless, Kraken used similar arguments to those put forth by Coinbase and Binance.US in their own motions to dismiss. Thus far there haven’t been many definitive decisions on this argument, and it will be some time before we see some. One thing is clear, though: It is highly likely that the Supreme Court of the United States might become involved at some stage.
The Coinbase lawsuit is currently happening in the Southern District of New York, Binance.US is being reviewed in the District of Washington and Kraken is being investigated in the Northern District of California. In another development, a company known as Legit.Exchange has just started a lawsuit against the SEC in the Northern District of Texas. The probability of the four district judges from different districts reaching a unanimous decision seems quite rare. Considering the likelihood of the parties involved challenging any rulings that are made, it is also probable that a few appeals courts will have a say.
Even though it’s much too early to predict the direction these cases will take, given the resources of the parties involved, it’s probable that at least one of the lawsuits will continue to be disputed until all pathways of appeal have been exhausted.
I’m curious to know what the readers of this blog who are well-versed in legal matters think about this. What might the process look like? What kind of timeframe are we considering, and what event might take place before the case reaches SCOTUS, assuming it goes that far?
If you have thoughts on this, you could respond to this blog or get in touch via Telegram.
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Nikhilesh De is CoinDesk’s managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.
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