Kraken: the crypto exchange wants the jury against the SEC

Yesterday, Kraken filed in court a documento in which the crypto exchange requests a jury trial against the SEC.

The crypto exchange Kraken requests a jury trial against the SEC

Last month a judge in California ruled that the SEC’s lawsuit against Kraken will go to trial. 

In the document Kraken presents an explicit request to have a jury trial for all matters related to the case against the SEC.

Although it does not clearly state the real reason why it requested the jury, in the document that is a full 76 pages long, it lists 18 points of defense with which it effectively accuses the SEC of having behaved in an unacceptable manner. 

In the USA citizens have the right to a trial by jury as enshrined in the Constitution, since it is considered a fundamental principle of the American legal system.

There are three types of juries, of which the first two (grand juries and petit juries) for criminal trials, and the third for civil cases.

It should be noted, however, that over time the power of juries has diminished significantly, to the point that some argue that the transfer of powers from juries to judges favors the élites. 

It may be that this is the real reason behind Kraken’s request, namely to prevent authorities such as judges and the SEC from being able to decide more easily against them. 

However, on the other hand, there are also those who argue that in complex disputes the jury may be substantially unable to fully understand the issues, to the point of causing conflicts with the judges who at that point may even go so far as to exclude it from the trial. 

The problem of the SEC against the crypto exchange Kraken

In fact, the problem raised by the SEC against the crypto exchange falls among the complex issues. 

The American agency accuses Kraken essentially of violations of security regulations. 

The question of which crypto should be considered security, and which not, is so complex that there are sharply different points of view. 

According to the same Securities and Exchange Commission, many criptovalute would be securities, but so far every time a court has been called to definitively resolve such issues, it has often opted to rule against the SEC, establishing that many cryptos are not to be considered securities.

Moreover, even among the judges there is no agreement, with some more inclined to side with the SEC, and others less so. 

At this point, it is rather difficult to imagine that a civil jury, chosen essentially at random, can really be able to resolve such an issue. Moreover, a unanimous judgment is required, so it will presumably be quite difficult to achieve it. 

Perhaps Kraken is hoping for a kind of complication in the decision-making process, in order to avoid the judge agreeing too easily with the SEC. 

The crypto considered security

The SEC accuses Kraken of having unlawfully allowed retail users to purchase unregistered securities such as ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and the SOL tokens. 

It should be noted, however, that it is not the SEC that can decide which assets should be considered security. 

For this reason, the agency turned to a court, because only courts in the USA truly have the right, and the power, to decide whether a particular financial asset should be considered a security or not. Furthermore, such decisions must be made asset by asset, thus with individual decisions for each individual crypto. 

The key point is that in the USA, as in many other States, it is illegal to offer unregistered securities to the public, and no crypto has ever obtained registration with a government agency as an investment contract. In fact, it is also quite likely that even by requesting it, they might not be able to obtain it. 

Until now, however, there are already two similar cases on which courts have definitively ruled: XRP and ETH. In both cases, it was decided that they cannot be considered securities if traded on the secondary market, that is, on exchanges. It is difficult to imagine that ADA, ALGO, and the other cryptos mentioned by the SEC could receive different treatment. 

According to Kraken, digital assets themselves cannot be considered investment contracts (i.e., security) because they do not entail any of the rights and obligations of a share, a bond, or any other financial asset that Congress has declared subject to SEC regulation. 

The consequences of the trial on the crypto market

In the event that Kraken prevails in this case against the SEC, there might not be significant consequences on the crypto markets. 

On the other hand, after the historic ruling on XRP last year, the markets have largely become convinced that the SEC is fundamentally wrong, and that it could end up losing all other similar cases as well.

In the case, however, of a victory by the SEC, the consequences could instead be strong. 

It must be said that they would not concern Bitcoin and Ethereum, at least in the medium/long term, because there are no longer any doubts that the two main cryptocurrencies cannot be considered securities.

However, they would concern both the cryptos potentially deemed securities by the judges, and the crypto market as a whole, because the majority of minor cryptocurrencies are the ones most at risk of being considered securities.