Looking at Kraken's Motion to Dismiss an SEC Lawsuit

There's some familiar arguments, and they all point to one conclusion: This is going to take a while.

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Crypto exchange Kraken filed a motion to dismiss the lawsuit it faces by the U.S. Securities and Exchange Commission.

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No fraud

The narrative

The U.S. Securities and Exchange Commission didn't allege actual fraud or harms to Kraken's consumers, the exchange argued in a motion to dismiss the lawsuit it faces.

Why it matters

This is one of several lawsuits the industry is tracking, including those against Coinbase and Binance.US, plus a new entrant hoping to secure a favorable ruling in a specific district. These suits all share one premise: How, exactly, might the SEC oversee the crypto industry and are its current actions appropriate?

Breaking it down

Some part of the Kraken motion to dismiss treads what at this point is very familiar ground: That the SEC hasn't really made its case that any of the assets it named are securities, that it's stretching the definition of an "investment contract, and that it's overstepping its boundary.

Other parts are a little more unique: Kraken referenced the SEC's arguments that the exchange actively marketed the digital assets it named, but didn't delve too deeply into that. And the exchange said the SEC hadn't alleged any direct consumer harm, but didn't explicitly address the SEC's commingling allegations.

Still, Kraken employed similar arguments to the ones made by Coinbase and Binance.US in their own motions to dismiss. We haven't gotten many definitive rulings on this argument, and we won't for a while. But one thing is clear: There's a very good chance that the Supreme Court of the United States might end up involved at some point.

The Coinbase case is in the Southern District of New York, Binance.US is in the District of Washington and Kraken is in the Northern District of California. Another company, going by the name Legit.Exchange, just filed suit against the SEC in the Northern District of Texas. The chances of four different district judges in four different districts finding a consensus is a bit slim. Assuming the parties involved appeal whatever rulings come out, we're also looking at a few appeals courts that will weigh in.

While it's obviously way too early to try and predict where these cases will go, it seems likely at this stage that – given the resources of the parties involved – at least one of these cases will probably keep getting appealed until that route is exhausted.

My question for the legally versed readers of this newsletter: What might that look like? What sort of timeline are we looking at, and what all might happen before SCOTUS, assuming we get that far?

You can respond to this newsletter if you have thoughts or reach out on Telegram.

Stories you may have missed

This week

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  • 17:00 UTC (12:00 p.m. ET) The judge overseeing the U.S. case against Alex Mashinsky held a hearing to confirm he was okay with his attorneys also representing Sam Bankman-Fried.


  • 19:00 UTC (2:00 p.m. ET) The judge overseeing the U.S. case against Sam Bankman-Fried held a similar hearing to confirm the same. Bankman-Fried confirmed his trial lawyers would no longer be representing him.


  • 14:30 UTC (10:30 a.m ET) The Financial Stability Oversight Council met in a closed session.
  • 19:00 UTC (11:00 a.m. PT) The judge overseeing the U.S. case against Binance signed off on the proposed plea (note: the same judge is overseeing the U.S. case against former Binance CEO Changpeng Zhao, but that sentencing hearing was rescheduled for April).


  • (Ars Technica) A Canadian court has ruled that Air Canada must abide by a refund policy its "AI" chatbot made up. Air Canada has taken down the chatbot.
  • (Reddit) One interesting detail about the proliferation of in-flight Wi-Fi is passengers can now post photos of the holes in their aircrafts' wings and ask questions about them, as someone on United flight 354 did earlier this week. The aircraft, a 29-year-old Boeing 757, safely diverted to Denver.
  • (Bloomberg) A new lawsuit alleges Alameda Research received a line of credit "worth billions of dollars" from Deltec Bank, which it then used to support the growth of tether (USDT).
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If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

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