Regulation
Oral Arguments Begin, Here’s What to Know
Kraken’s motion to dismiss the lawsuit filed by the U.S. Securities and Exchange Commission (SEC) is scheduled for oral arguments today at 1 PM ET/10 AM PT.
The SEC accuses Kraken of being unregistered exchange and broker-dealer and asserts that 11 tokens, SOL, ADA, and ALGO, are securities.
Kraken Vs. SEC Oral Arguments Begin
The SEC has accused Kraken of running an unregistered securities exchange, Kraken also has been accused of operating as an unregistered broker-dealer and also of operating as an unregistered securities clearing agency. The SEC stated that 11 tokens listed on Kraken, including ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL, are securities. Kraken’s dismissal motion relies on the Howey Test, stating that the SEC has not alleged that any securities transactions occurred on its exchange.
🚨NEW: Oral arguments for @krakenfx’s Motion to Dismisst against the @SECGov begins today at 1PM ET/10AM PT.
In addition to Kraken operating as an unregistered exchange and broker-dealer, the SEC is claiming 11 tokens including $SOL, $ADA and $ALGO are securities.
— Eleanor Terrett (@EleanorTerrett) June 20, 2024
Kraken had filed a reply to the SEC lawsuit, arguing that the agency’s case is weak and that the suit should be dismissed. In its latest response, Kraken strongly refutes the SEC’s allegations of trading unregistered securities.
The exchange, therefore, said that the SEC did not correctly identify the investment contracts that are tradeable on the exchange and took issue with some of the terms used by the SEC, such as ‘investment concept’ and ‘ecosystem’, saying that these should have been ‘investment contract’ and ‘enterprise’ respectively.
Similarly, Kraken has received support for its motion to dismiss from Senator Cynthia Lummis, the Blockchain Association, the DeFi Education Fund, the Chamber of Digital Commerce, the Investor Choice Advocates Network, Paradigm, and two administrative law scholars. These entities have filed briefs in support of Kraken’s position.
Comparison with Coinbase Case
The legal community is waiting to see whether the SEC will employ the same arguments in Kraken’s case as in the Coinbase motion to dismiss the hearing. In that case, the SEC claimed that tokens’ ecosystems make them fall under the Howey Test to be classified as securities. The SEC will examine this argument to determine if this is still applicable in the current situation.
Moreover, Kraken relies on the SEC cases on initial coin offerings (ICOs) to back its argument. The crypto exchange notes that these cases concerned contractual rights and obligations, which is consistent with Kraken’s view of investment contracts.
Coinbase’s Chief Legal Officer, Paul Grewal, has earlier on accused the SEC of making contradictory arguments. In a similar case against Coinbase, the SEC again claimed that most of the supported tokens are investment contracts, using the Howey Test. As per Coinbase, the SEC’s mixed signals and unequal enforcement actions have led to legal ambiguity in the digital asset market.
BTC and ETH Commodity Status
The SEC has allocated commodity status to Bitcoin (BTC) and Ethereum (ETH) through the approval of spot ETFs, although SEC Chair Gary Gensler has not publicly addressed ETH’s status.
Bitcoin and Ethereum have arguably the two largest “ecosystems” behind them, raising questions about why other tokens with significant ecosystems are classified differently.
The crypto community and legal experts will closely follow today’s arguments to understand how the SEC’s stance on what constitutes security may evolve. This case, along with the Coinbase lawsuit, could set significant precedents for the regulatory landscape of digital assets in the United States.
Read Also: Kraken Disputes SEC Claims, Cites Previous ICO Cases for Support
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Polymarket, a crypto-based prediction market, is likely to be prohibited by France’s gambling regulator, the ANJ, after a huge amount of bets were placed on the 2024 U.S. presidential election. Since the global audience engaged in prediction platforms, Polymarket experienced a record jump, with $450 million expected to be distributed to users following the victory of Donald Trump.
This increase of betting volume and large stakes has become a matter of concern for the French regulator because the platform offers unlicensed gambling services.
$450 Million in Payouts Expected After U.S. Election Bets
Prediction markets, which are expected to increase their payout to election bettors to around $450m following Donald Trump’s projected win, are attracting increasing attention.
Although conventional polls pointed to a closer contest, prediction markets such as Polymarket and Kalshi recorded a steep rise in Trump’s chances in the last few days, indicating a strong divergence with poll-based expectations.
Among the active users of Polymarket, a French trader called “Theo” made a $26 million bet on Trump’s win and won $49 million. This big bet made Polymarket popular, as the French authorities paid attention to the platform and its popularity among French residents, which led to concerns about the compliance of the platform with French gambling legislation.
France’s ANJ Considers Blocking Access to Polymarket
The ANJ has claimed that Polymarket is involved in gambling which is only allowed in France by licensed operators. According to local media, the regulator has the power to ban access to unlicensed gambling sites and is expected to restrict access to Polymarket soon.
An ANJ insider said: “Polymarket is just betting on something that is completely uncertain, which is exactly what gambling is.”
If put in place, the ban would prevent the usage of the application in France, despite the fact that users can still try to avoid the restriction by connecting to VPN. The ANJ could also try to influence media outlets and directories to stop advertising or linking to Polymarket and, thus, limit its audiences even more.
Regulatory Concerns Over Market Manipulation
The high level of activity on Polymarket has led to speculations that the platform may be used for market manipulation. Two blockchain analysis firms, Chaos Labs and Inca Digital, recently revealed that there was potential wash trading within Polymarket’s U.S. presidential betting market where the same assets are bought and sold to simply create a fake market. This type of trading is rather manipulative and can lead to the distortion of signals on the market and mislead other participants.
The US Commodity Futures Trading Commission also has concerns about prediction markets and put forward a rule in May aiming at stricter regulation of such markets due to the potential for manipulation.
Although no final decision has been reached, regulatory actions could impact Polymarket’s ability to operate freely in other markets, including the U.S.
Kelvin Munene Murithi
Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
FTX co-founder Gary Wang has requested a federal judge not to send him to prison. He noted that he is testifying against the former business partner, Sam Bankman-Fried, someone he has known for a long time in a fraud case.
The lawyer for Wang submitted a sentencing memo in Manhattan federal court wherein he claimed that his client should not be incarcerated as he provided assistance to the prosecutors as well as his role in the scheme was comparatively less.
Wang, who pleaded guilty to fraud and conspiracy when FTX went bankrupt in 2022, is to receive his sentencing on the 20th of November.
FTX Co-Founder Gary Wang Appeals for No Jail Time
The defense counsel for FTX co-founder Gary Wang highlighted his client’s early cooperation with the federal prosecutors as one of the key reasons why the court should consider him for mercy. According to Graff, Wang was one of the first FTX executives to meet with the authorities and share information on the FTX and Alameda Research. Wang gave a testimony in the trial that led to the recent conviction of Bankman-Fried who was sentenced to 25 years in prison.
Speaking at the trial, Wang described how he was ordered to change the code of FTX in order to enable Alameda Research to use the assets of the company’s clients, which is one of the key points of Bankman-Fried’s fraud.
FTX co-founder’s lawyer noted that his involvement in the fraud was less than some of the other former executives, including Caroline Ellison, former CEO of Alameda Research, and Nishad Singh, FTX’s former head of engineering. Wang, his lawyer said, did not start or operate the scheme and was not personally involved in the provision of false information to the investors.
“Gary was not involved in the scheme at its inception, was never provided with details of the scheme, and, in contrast to Bankman-Fried, Ellison and Singh, never engaged in any affirmative action of deception,” Graff wrote.
Sentencing Comparisons to Other Executives
Wang’s attorney argued that a prison sentence would create an “unwarranted sentencing disparity” with Nishad Singh, who avoided jail time after pleading guilty and cooperating with the government. Singh, who faced potential decades-long sentences, was ultimately sentenced to time served and three years of supervised release.
Ellison, another major cooperator, received a two-year prison sentence. FTX co-founder Gary Wang contended that Wang’s level of involvement was even lower than Singh’s, supporting a non-custodial sentence for Wang as well.
Graff also noted Wang’s personal circumstances, stating that Wang is expecting the birth of his first child shortly after his sentencing date. Wang’s attorney suggested that allowing him to remain with his family would align with the court’s treatment of other cooperators in the case.
“Gary wants nothing more than to be a good husband and father and to continue his work to facilitate FTX victims’ recovery,” Graff wrote.
Separately, the U.S. government is working to reclaim approximately $13.25 million in political donations made by FTX executives, including Bankman-Fried and Singh. Judge Lewis Kaplan however granted the government additional time to negotiate the return of these funds, extending discussions with the PACs until January 15, 2025.
Kelvin Munene Murithi
Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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.
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.
This Is A Breaking News, Please Check Back For More
Kelvin Munene Murithi
Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.
Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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