A California federal judge rejected crypto exchange Kraken’s bid to appeal his decision to allow a United States Securities and Exchange Commission lawsuit to proceed, as it “would only delay resolution.”
Judge William Orrick wrote in a Nov. 18 order dismissing Kraken’s motion for interlocutory appeal that he found the SEC had “adequately alleged” that crypto traded and sold on Kraken were investment contracts under the Howey test and subject to securities laws.
“Fundamentally, I do not believe that certification will materially advance the ultimate termination of the litigation,” he wrote. “While the SEC has plausibly alleged its theory of securities violations against Kraken, only discovery will establish whether the sales, trades, and exchanges on Kraken truly met all the Howey elements.”
Highlighted excerpt from Judge Orrick’s order reminding Kraken that it’s his choice whether to allow an interlocutory appeal. Source: CourtListener
In September, Kraken asked Orrick for permission to appeal the August rejection of its motion to dismiss, arguing there was “substantial ground for difference of opinion” on securities laws that a higher court could answer — and possibly end the case early.
Kraken claimed there were questions around whether an investment contract without a contract or with no post-sale obligations could violate laws and if Howey required an investment in an enterprise.
But Orrick disagreed, saying it “has not cited a case since Howey” where a court held that contractual formalities or post-sale obligations are needed to constitute an investment contract.
“Several courts have addressed these issues and disagreed with Kraken’s position,” he added.
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The ruling comes after the SEC had asked the court earlier this month to dismiss three of Kraken’s defenses, arguing that existing laws define investment contracts and gave the exchange fair notice.
The SEC said Orrick should dismiss the defenses as it claimed Kraken would pursue “irrelevant and burdensome discovery under the pretense that the discovery somehow relates to its due process defenses.”
The SEC sued Kraken in November 2023, alleging it failed to register as an exchange, broker, dealer and clearing agency.
Counsel for Kraken did not immediately respond to a request for comment outside of business hours.
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