- The SEC-Kraken lawsuit has drawn the attention of a group of US attorneys general.
- The group has argued against the commission’s regulatory overstep.
- Kraken recently filed a motion to dismiss the lawsuit.
Over the past year, the Securities and Exchange Commission (SEC) has been thrust in the spotlight for confrontations against crypto exchanges and projects, driven by its relentless pursuit of oversight over the asset class.
Twice in 2023, the commission initiated legal proceedings against Kraken, accusing the company of violating US securities laws. The legal battle recently intensified when Kraken fired back at the commission, condemning its overstep and flawed approach to industry regulation.
Now, in a positive development for Kraken, a group of legal attorneys have thrown their weight behind the commission’s overreach claims.
Kraken Lawsuit Spotlights SEC’s Authority
In an amicus brief filed on Thursday, February 29, eight attorneys generals of the United States argued against the SEC’s actions in the Kraken lawsuit, asserting that its “enforcement action exceeds its delegated powers.”
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While the brief maintains neutrality between both parties, it opposes the SEC’s regulation of crypto assets, emphasizing that the U.S. Congress has not granted the commission authority over crypto assets. The attorneys condemned the SEC’s efforts to expand its definition of ‘investment contracts’, reiterating the state’s position to prevent the commission’s authority from overstepping.
Urging the court to reject the commission’s bid to categorize crypto assets as securities, the attorneys asserted that the SEC’s exercise of delegated authority “puts state consumers at risk by preempting state statutes better tailored to the specific risks of non-securities products.”
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The voiced concerns align with the broader whispers of the questionable nature of the SEC’s actions, which has drawn increased scrutiny from political figures and lawmakers.
Is the SEC Skating On Thin Ice?
Under the leadership of the present Chair, Gary Gensler, the commission has become a focal point of scrutiny in recent months.
Only recently, the SEC was declared “unprofessional and unethical” by five U.S. Senators. The group condemned the commission’s negligence, exemplified in its misconduct in the battle against DEBT Box.
The condemnation hinged on the commission’s provision of false information and misrepresentation of evidence in the case, which had wrongly accused the firm of orchestrating a fraudulent $50 million scheme.
SEC Chair Gary Gensler has also faced backlash for demonstrating an abuse of power during his tenure, particularly for his unfounded calls of oversight on operations beyond the commission’s jurisdiction, such as seeking to prohibit banks from offering crypto custodian service.
These have raised calls for the defunding of the commission and the outright ousting of Gensler by several congress members.
On the Flipside
- The SEC has also gone against crypto firms, including Binance, Coinbase, and Ripple, all of which criticized its hostile stance toward the industry.
- The commission has recently unveiled its newly revised ‘dealer’ rule, seeking greater oversight on crypto and DeFi.
- Lawmakers have voiced apprehensions about the SEC’s security practices, particularly after a breach on its official X account.
Why This Matters
Despite the attorney general’s brief maintaining neutrality between Kraken and the SEC, its opposition to the commission’s approach lends credibility to Kraken’s argument to de-classify crypto as securities, and could significantly impact the outcome of the ongoing legal dispute.
Read more about the SEC’s battle against yet another crypto entity and its upcoming deadlines:
Ripple vs. SEC Case Is in the Endgame: These Are the Key Dates
The Hong Kong government has shut its doors on unlicensed exchanges, sets deadline to cease operations:
