Kraken Vs SEC Lawsuit: US Court Issues Major Order
In the ongoing legal battle between Kraken and the U.S. Securities and Exchange Commission (SEC), a district court has issued a key order regarding the discovery letter brief filed by the crypto exchange.
A judge has denied Kraken’s request to compel the production of documents and information concerning Bitcoin and Ether, the SEC’s public statements and testimony regarding digital assets, and the regulator’s internal trading policies on digital assets.
Court Denies Kraken’s Requests in US SEC Lawsuit
In the latest filing in the Northern District California Court, Magistrate Judge Robert Illman has denied Kraken’s requests to seek key documents from the US SEC. Nevertheless, this has finally ended the unresolved discovery dispute between the parties.
Kraken’s requested an order to compel the SEC to produce documents on why Bitcoin and Ether were not included in the SEC’s complaint despite being traded similarly to 11 crypto tokens on the platform. The magistrate judge finds the critical argument “unpersuasive“.
As per the court, the request for production (RFP) is too broad and irrelevant to the SEC’s allegations on sales of 11 crypto tokens. The court claims this increases the burden for both parties.
Judge Also Rejected SEC’s Policy and Public Statements Relevance
Also, Kraken asked for the SEC’s digital assets policies and guidance and application of Howey test to the tokens traded on the exchange. However, the magistrate judge noted that all details related to the SEC’s policies and guidance governing its employees are not limited to ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL tokens.
“The court finds the matter suitable for disposition without oral argument. For the reasons stated below, defendants’ request to compel the information they seek is denied,” the magistrate judge ruled.
Moreover, the judge also rejected Kraken’s demand for evidence related to various public statements by the SEC on digital asset regulation.
The exchange and the crypto industry have contended that former SEC division director William Hinman’s speech is relevant to the status of Bitcoin and Ether under federal securities laws. However, Kraken does not expend any independent effort to justify its request to compel information.
US SEC Arguments in Case
Judge William Orrick earlier cleared that contracts and expectations surrounding the sale may form an investment contract. Considering this, Judge Orrick earlier denied Kraken’s motion to dismiss the SEC lawsuit.
The SEC’s pleadings alleged that during their initial offerings and subsequent transactions on Kraken those assets were sold as investment contracts.
Notably, Kraken has argued for fair notice defense and the major questions doctrine in the SEC lawsuit. However, the court claims that the exchange has argued broad crypto regulatory issues, but failed to narrow down on the crypto transactions.
Meanwhile, the SEC will file its principal brief regarding the appeal by January 15 as Ripple cross-appealed to target the SEC’s rules and guidance as inconsistent and unclear. This includes fair notice defense, definition of investment contract, and institutional sales of XRP are security.
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