Crypto Platforms and the Loss Circle

Former SEC official John Reed Stark has called the recent ruling in the SEC’s case against Kraken a major victory for the regulator.

In a significant development, Judge William Orrick denied Kraken’s request to dismiss the closely watched lawsuit.

The SEC had sued Kraken in November, accusing it of offering unregistered securities, including some prominent cryptocurrencies like Cardano (ADA) and Solana (SOL).

In an attempt to turn the ruling in his company’s favor, Kraken’s chief legal officer Marco Santori called the decision a major win, noting that the judge dismissed the term crypto asset insurance as inaccurate.

The judge also noted that this linguistic error does not negate the regulator’s theory that Kraken engaged in unregistered securities trading.

The judge ruled that secondary sales of crypto assets on Kraken largely met the Howey test, which is used to determine whether a particular asset is a security token under U.S. law.

Stark noted that Ripple’s latest ruling has no legal precedent in any U.S. court.

Nevertheless, Kraken’s lead attorney Marco Santori remains confident that his firm will ultimately prevail in its SEC challenge.

Santori said:

Today’s ruling confirms what we have been saying all along: The SEC cannot reliably regulate cryptocurrencies through direct enforcement action.