In a recently declared case, the Federal Court for the Northern District of California has said that no token traded on Kraken can be considered a security. This judgment is a win for Kraken, and on the broader crypto market since the company stands its ground on the fact that it does not list securities.
Marco Santori, the Chief Legal Officer of Kraken, shared his opinion on the court ruling in a series of X posts. He argued that the ruling is in the best interest of Kraken and is relativity clear to the users of cryptocurrencies all over the world. Santori pointed that the court met SEC’s creation of the “crypto asset security” concept as being unclear at best, and confusing at worst.
The court frowned at the approach of the SEC always to falsify Kraken’s positions by using a cliché of a “written contract” to argue that a token cannot be a security without it. Despite these outcomes, the court granted to proceed to the discovery stage in the case. The reason for this decision can be found in the court’s approach undertaken earlier, as in the Ripple case, where the court draws a distinction between. On the one hand, a token itself is not a security, on the other, agreements connected with it can be considered a security.
SEC’s Case Falters, Kraken Stands Firm
While the idea that “tokens are securities” put forward by the SEC was dismissed as absolutely unsound, the regulatory body must now prove that each transaction on Kraken complies with the requirements of the Howey Test. Nonetheless, Kraken remains optimistic that these factors will not be satisfied and lays down its defenses for this in the discovery phase that follows.
Santori stated his intent to keep fighting for Kraken’s position and maintained that Kraken will fight and Kraken will win. He also elaborated on the consequence that this holds across the entire crypto industry under the SEC’s current approach to enforcement. He also noted that applying this standard across the entire crypto industry ‘could mean that millions, if not billions, of transactions are subject to expensive, time-consuming discovery.’
The decision makes it even more apparent that the Congress should enact a robust market structure framework for the crypto space. For the goal mentioned by the government officials to be achieved, Santori was quick to offer commendation to them and to the court for its carefully given judgment.
On the same note, Ripple’s Chief Legal Officer, Stuart Alderoty, also chimed into the case to argue that another court has further dismissed the existence of a defintion known as ‘crypto asset security’. This is a great blow for the SEC and its approach on establishing the cryptocurrency market through enforcement.
