Kraken loses key defense in ongoing SEC legal battle
Kraken loses key defense
A federal judge in California has dealt a significant blow to Kraken in its legal battle with the U.S. Securities and Exchange Commission (SEC), rejecting a key defense that questioned the agency’s authority.
The ruling, issued by Judge William Orrick, dismissed Kraken’s use of the “major questions doctrine,” a legal principle asserting that government agencies cannot exercise powers not explicitly granted by Congress, according to the Cryptopolitan.
Judge Orrick Upholds SEC's Mandate
The SEC has accused Kraken of offering unregistered securities through its platform, prompting the crypto exchange to mount 18 affirmative defenses, including claims of insufficient regulatory clarity.
The court granted the SEC’s motion to dismiss three defenses: the major questions doctrine, due process, and fair notice. However, Judge Orrick allowed Kraken to proceed with the latter two, stating they were “plausibly alleged.”
In rejecting the major questions doctrine defense, Judge Orrick ruled that the SEC’s actions fell within its Congressional mandate and did not exceed its authority. He emphasized that the crypto industry’s economic impact, while growing, is not yet comparable to industries like energy or student loans, which have previously triggered the doctrine.
Ripple Effects for the Crypto Industry
The decision has sparked mixed reactions in the crypto community. Legal experts warn that a defeat for Kraken could set a precedent for stricter regulatory enforcement. Himanshu Sirohi, a crypto analyst, noted that smaller companies might exit the U.S. market to avoid similar lawsuits.
The outcome of this case, observers say, could significantly shape the regulatory landscape for cryptocurrency, forcing exchanges to either comply with stricter SEC rules or face legal consequences. As the case unfolds, the crypto industry awaits further clarity on its regulatory future.
Kraken Exchange donated $111,111 in Bitcoin to Ross Ulbricht after his release from prison on January 22. Ulbricht, the Silk Road founder, was granted a full pardon by President Trump after serving 12 years.
