Kraken seeks jury trial to contest SEC’s allegations of operating unregistered securities exchange

Kraken has again denied the U.S. Securities and Exchange Commission's allegations and demanded a jury trial to defend its position in the lawsuit, according to a Thursday court filing.

In November 2023, The SEC charged Payward Inc. and Payward Ventures Inc., the companies behind Kraken, with operating the digital asset platform as an unregistered securities exchange, broker, dealer, and clearing agency. The regulator listed SOL, ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR and OMG tokens as unregistered securities.

While Kraken sought to dismiss the lawsuit, a U.S. district court denied its motion in August. The U.S. SEC had made similar allegations in its lawsuits against Binance and Coinbase.

“Kraken has tried to work with the SEC to make registration feasible,” the crypto exchange wrote in the filing . “But the industry’s efforts have been stonewalled at every step, as the SEC has instead chosen to pursue a strategy of fighting with its sister regulators for enforcement authority its Chair admitted it did not have.”  

Kraken alleged that the SEC has never clarified which transactions on Kraken constitute investment contracts. It stated that digital assets cannot be financial securities as they do not carry the rights and obligations of stocks, bonds or other financial assets. 

The issue of definitions

The exchange also stated that it does not acknowledge specific terms used by the SEC in its complaint, such as “crypto asset securities,” “Kraken-traded securities,” “proprietary assets,” and “investors.” The exchange argued that these terms are ambiguous or undefined.

This is a common criticism among crypto firms, who claim that the SEC uses vague or made-up terms to justify securities violation charges.

While not directly responding to Kraken’s filing, the SEC clarified its position in its amended  complaint against Binance. The agency stated that the term 'crypto asset securities' does not refer to the crypto asset itself and “regrets any confusion” it may have caused with the term.

“Think it's time for [the SEC] to admit it has become a twisted pretzel of contradictions,” Ripple’s chief legal officer Stuart Alderoty commented on X in response to the SEC’s clarification.