Kraken seeks jury trial in SEC lawsuit, presents defense arguments

Crypto exchange Kraken has demanded a jury trial in the case brought against it by the U.S. Securities and Exchange Commission (SEC), a court filing Thursday showed.

A California Judge ruled last month that the SEC's lawsuit against Kraken will proceed to trial. The verdict came after similar rulings in cases brought on by the agency against Binance and Coinbase (COIN), which also face allegations of violating federal securities laws by not registering as a broker, clearinghouse or exchange with the SEC.

The SEC sued Kraken in the Northern District of California last November asking the court to permanently enjoin the exchange from further securities violations, seeking disgorgement of its “ill-gotten gains” and other civil penalties. The regulator listed ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and the SOL tokens as the 11 unregistered securities.

In Thursday's court filing, Kraken reiterated its position denying that it has engaged in illegal conduct, responding to each allegation in the SEC's lawsuit and presenting 18 other defenses.

Kraken's legal argument appeared to be based on its interpretation of the Securities Act and the Exchange Act because neither includes digital assets. The exchange said it never registered with the SEC because it was never required to do so, and that it was not an exchange, a broker dealer or a clearing agent within the meaning of the Exchange Act.

The firm further argued that the SEC failed to state "a claim upon which relief may be granted because it did not have the authority to regulate Kraken."

"The digital assets themselves cannot be the investment contracts because they carry none of the rights and obligations of a share of stock, a bond, or any other financial asset that Congress has said is subject to SEC regulation," the filing said.

Kraken admitted to listing more than 220 crypto assets globally, permitting margin trading, over-the-counter trading desk, instant buy features, and customer applications, but denied that these services transform its platform into a securities exchange, clearing agency, or broker-dealer.

Specifically, Kraken accused the SEC of acting without due process and fair notice, suggesting action had been taken against it for exercising its first amendment.