California federal judge William Orrick has rejected the cryptocurrency exchange Kraken's attempt to appeal his decision allowing the Securities and Exchange Commission (SEC) lawsuit to proceed against the company.
Why the Judge Denied the Appeal
Judge William Orrick issued an order on November 18 dismissing Kraken's motion for interlocutory appeal, stating it would only delay resolution. He noted the SEC had 'adequately alleged' that the cryptocurrencies traded and sold on Kraken were investment contracts under the Howey test and were subject to securities laws.
Kraken's Arguments and the Court's Opinion
In September, Kraken requested an appeal of the August rejection of their motion to dismiss, arguing there was 'substantial ground for difference of opinion' on securities law that a higher court could address. However, the judge noted that Kraken had not cited cases since Howey requiring formal contracts or post-sale obligations for an investment contract.
Case History and SEC's Stance
The SEC lawsuit against Kraken was initiated in November 2023, alleging failure to register as an exchange, broker, dealer, and clearing agency. Earlier this month, the SEC asked the court to dismiss three of Kraken’s defenses, stating that existing laws clearly define investment contracts.
The legal case against Kraken highlights the importance of compliance with securities laws and demonstrates the complexities of regulating the cryptocurrency market.
