The U.S. Securities and Exchange Commission (SEC) scored a partial legal victory in its case against crypto exchange Kraken, with a federal judge ruling to dismiss a key defense brought by the company. Recently, Judge William Orrick of California struck down Kraken’s argument that Congress hadn’t granted the SEC authority over cryptocurrency. SEC Gains Ground Against Kraken The dismissed argument, known as the “major questions doctrine,” asserts that regulatory agencies cannot exercise powers not explicitly granted by Congress. However, Judge Orrick determined that the SEC’s actions against Kraken did not overstep its delegated authority. He emphasized that while cryptocurrency is a growing sector, it hasn’t reached a level of economic significance comparable to other major industries regulated under this doctrine, such as energy markets or student loan debt. This decision comes as part of the SEC’s lawsuit against Kraken, filed in November 2023. The regulator claims that Kraken has been offering unregistered securities through its platform since 2018, in violation of U.S. securities laws. Fair Notice Defense Still Stands While the court rejected Kraken’s major questions defense, Judge Orrick allowed another critical argument to remain. Kraken had argued it lacked “fair notice” from the SEC about its alleged legal violations. The judge acknowledged that Kraken had plausibly claimed the SEC failed to adequately clarify how existing legal frameworks, such as the Howey Test, applied to the exchange’s activities. The Howey Test determines whether certain transactions qualify as investment contracts, thereby subjecting them to securities regulations. According to Judge Orrick, the SEC has yet to demonstrate that any entity in Kraken’s position would have reasonably understood their transactions to fall under this classification. The fair notice defense, which invokes due process rights, could potentially serve as a pivotal point in Kraken’s ongoing legal battle with the SEC . Broader Implications for the Crypto Industry Kraken is one of several cryptocurrency exchanges currently under scrutiny by the SEC. The regulator has initiated similar lawsuits against other major players, including Binance , and Ripple, as part of its broader push to establish a regulatory framework for digital assets. To navigate these complexities, the SEC has established a specialized crypto task force, led by Commissioner Hester Peirce, known for her crypto-friendly stance . This move signals the agency’s intent to regulate the evolving crypto landscape while clarifying its legal boundaries. The post Judge Partially Backs SEC in Kraken Case, Rejects Major Questions Defense appeared first on TheCoinrise.com .
