A California federal judge has denied Kraken’s request to appeal a decision allowing the SEC’s lawsuit against the exchange to proceed.
Judge William Orrick ruled that the SEC sufficiently demonstrated that cryptocurrencies traded on Kraken qualify as investment contracts under the Howey test and are subject to securities laws.
The Howey Test, established by the United States Supreme Court, is a framework used to determine if a transaction qualifies as an investment contract, making it subject to securities regulations.
Kraken argued that there was room for legal interpretation regarding investment contracts and questioned whether such contracts require formal agreements or post-sale obligations. The judge rejected these claims, stating courts have consistently disagreed with Kraken’s stance.
The SEC, which filed the lawsuit in November 2022, accuses Kraken of operating without proper registration as an exchange, broker, dealer, or clearing agency.
Earlier, the SEC sought to dismiss Kraken’s defenses, asserting clear regulations and accusing the exchange of pursuing unnecessary legal challenges.
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