A federal judge in California, William Orrick, recently supported the Securities and Exchange Commission (SEC) by rejecting one of the defenses put forward by the crypto exchange Kraken
The ruling, issued on January 24 by Judge Orrick, dismissed Kraken’s claim that Congress had not given the SEC authority to regulate cryptocurrency markets.
The SEC filed its lawsuit against Kraken in November 2023, accusing it of operating as a securities exchange without proper registration.
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The decision focused on the “major questions doctrine”, a legal principle that limits government agencies from claiming powers not explicitly granted by Congress.
The judge ruled that the SEC’s actions did not exceed the scope of authority that lawmakers could reasonably have intended to give it. He explained that cases involving the major questions doctrine typically address issues with economic impact, like national energy policies or large-scale student loan programs.
While this ruling removed one of Kraken’s key defenses, the court allowed the exchange to continue using its “fair notice” argument. This defense claims that the SEC did not give Kraken clear guidance or warnings about its alleged violations.
Judge Orrick agreed that Kraken had made a reasonable case, stating that the SEC must show how a typical business in Kraken’s position would understand its platform’s activities as investment contracts under the Howey test—a legal standard for identifying securities.
Meanwhile, the SEC recently targeted Nova Labs, the company behind the Helium network. What happened? Read the full story.
