Just In: US SEC Files Motion for Judgment Against Kraken, Challenges Key Defenses

The U.S. Securities and Exchange Commission (SEC) has filed a motion seeking judgment in its case against cryptocurrency exchange Kraken, focusing on defenses such as “fair notice” and the “major questions doctrine.”

This move, led by SEC Chairman Gary Gensler’s team, aims to limit further discovery into the agency’s regulatory policies, particularly those affecting the crypto sector. The timing of the filing has drawn attention, as some in the industry view it as a strategic attempt to shield the SEC’s methods from closer examination.

US SEC Files Motion for Judgment Against Kraken

The SEC’s motion seeks to dismiss defenses put forward by Kraken that include the fair notice defense and the major questions doctrine. The fair notice defense argues that Kraken did not receive adequate regulatory guidance regarding its crypto-related activities. 

Meanwhile, the major questions doctrine suggests that regulatory agencies, such as the SEC, should not make major policy decisions without clear direction from Congress.

Last night, while Americans exercised their sovereign right to choose their political future, Gensler's deputies at the SEC filed a motion seeking judgment in Kraken's case on defenses like fair notice and the major questions doctrine. This motion transparently attempts to avoid…

— Michael O'Connor (@JDMikeJ) November 6, 2024

Subsequently, the US SEC’s motion appears intended to prevent further discovery into its policies, which Kraken and other crypto advocates have criticized as inconsistent and unclear. A similar motion was filed in Ripple case, where the US SEC failed to secure a judgment. Michael O’Connor, an attorney representing Kraken expects a similar outcome in the Kraken case, though Kraken has indicated that it has additional defenses should this motion proceed.

Timing of the Motion Raises Questions Amid Political Change

The timing of the SEC’s motion has sparked discussion, particularly as it coincides with recent political developments. Gary Gensler’s term as SEC Chair may be nearing its end following Donald Trump’s victory in the 2024 U.S. presidential election. 

Donald Trump previously expressed intentions to replace Gensler, signaling potential changes in the agency’s leadership and approach to crypto regulation.

Michael O’Connor argues that the US SEC’s motion may be an attempt by Gary Gensler’s team to push forward its regulatory stance before a new administration takes office. Concurrently, Galaxy CEO Mike Novogratz, have suggested that Commissioner Hester Peirce, known for her pro-crypto views, could be a favorable candidate for SEC Chair under the new administration.

Industry Leaders Push for Regulatory Reform

The crypto industry has been vocal in its desire for clearer and more consistent regulations, particularly as the SEC continues its “regulation by enforcement” approach. Novogratz, speaking on CNBC, endorsed Hester Peirce for SEC Chair, citing her long-standing support for a more transparent regulatory framework.

Ripple’s Chief Legal Officer Stuart Alderoty also voiced support for regulatory reform, suggesting that the incoming Trump administration has an opportunity to make the U.S. a leader in the crypto space.

Ripple CEO Brad Garlinghouse concurrently has echoed similar sentiments, presenting a checklist for reform that includes replacing Gensler and instituting a more favorable regulatory environment for blockchain technology.