A federal judge in California denied Kraken’s request to appeal his earlier ruling, which allowed the SEC’s lawsuit against the crypto exchange to move forward. The judge stated that granting the appeal would only cause unnecessary delays.
In his order on Nov. 18, Judge William Orrick explained that the SEC had provided sufficient evidence to claim that the cryptocurrencies traded and sold on Kraken qualify as investment contracts under the Howey Test. He wrote:
While the SEC has plausibly alleged its theory of securities violations against Kraken, only discovery will establish whether the sales, trades, and exchanges on Kraken truly met all the Howey elements.
In September, Kraken requested Orrick’s approval to appeal the August decision, rejecting its motion to dismiss the case. Additionally, the company argued that there were significant legal uncertainties surrounding securities laws that a higher Court could clarify, potentially resolving the case early.
SEC wins round against Kraken in Court battle
Kraken questioned whether an investment contract could violate securities laws without a formal agreement or any commitment after the sale and whether the Howey Test requires an investment in a common enterprise. However, Orrick disagreed, arguing that no case since Howey has required contractual formalities or post-sale investment contract commitments.
Judge William Orrick pointed out that multiple courts have examined these issues and rejected Kraken’s stance. The decision follows the SEC’s recent request to the court to dismiss three of Kraken’s defenses. The agency urged that current laws already define what qualifies as an investment contract and that Kraken had been given legal notice of these regulations.
Additionally, the SEC urged Judge Orrick to reject Kraken’s defenses, claiming the exchange might seek unnecessary and time-consuming evidence to support its due process claims.
Related | Crypto.com expands to traditional finance with Fintek acquisition
