Federal judge 'dismisses' Kraken appeal in SEC lawsuit

A federal judge in California has dismissed cryptocurrency exchange Kraken's request for appeal against the Securities and Exchange Commission's (SEC) decision to allow the lawsuit to proceed.
On the 18th, Judge William Orrick wrote in his order denying Kraken's appeal that "the SEC has determined that the cryptocurrencies traded and sold on Kraken do not meet the subtest (H
"The litigation has been sufficiently advanced that the securities laws apply to the investment contracts based on the (Owey) Test," Judge Orrick said.
"We do not believe that the SEC's assertion of a plausible theory of securities law violations against Kraken will materially hasten the ultimate conclusion of the litigation," the company said. "However, the SEC has not provided any evidence that the sales and transactions actually conducted at Kraken were fraudulent."
"Whether an exchange meets all the elements of the subtest can only be ascertained through the evidence-gathering process," it added.
Last September, Kraken won the right to appeal an August ruling that denied its request to dismiss the lawsuit.
The suit also argued that there were significant issues of securities law that could lead to significant disagreement. If the court could answer these issues, it could bring the case to a close.
Kraken argued that "there is a question as to whether a securities law violation occurs in the absence of a contractual investment agreement or post-sale obligation, and whether the subtest requires an investment in a company."
However, Judge Orrick disagreed, stating that "in no case after the subtest is there any form of contract or post-sale obligation necessary to constitute an investment contract."
"Kraken has been unable to cite any court precedent that has held that the issue is not binding," he said. He added that "several courts have addressed this issue and ruled against Kraken's position."