Marco Santori, the chief legal officer of the digital asset exchange Kraken, stated that a federal judge's ruling that the tokens traded on Kraken are not securities contradicts claims from the U.S. Securities and Exchange Commission (SEC). He described this as a victory for regulatory certainty and the broader crypto community. Santori shared his statement in an Aug. 23 post on X.
"Today, the Federal Court for the Northern District of California ruled, as matter of law, that none of the tokens trading on Kraken are securities," said Santori. "This is a significant win for Kraken, for the principle of clarity and for crypto users everywhere. It also confirms Kraken's long-standing position that it does not list securities."
In November, the SEC sued Kraken in the federal district court of San Francisco, alleging that Kraken's trading platform operates as an unregistered securities exchange, broker, dealer, and clearinghouse. The SEC claimed that Kraken should have registered its services with the SEC and that its failure to do so constitutes a violation of the Securities Exchange Act of 1934.
On Aug. 23, U.S. District Court Judge William H. Orrick of the Northern District of California ruled that the crypto tokens named in the SEC's lawsuit are "not themselves investment contracts," according to CoinDesk. However, Orrick is allowing the case to go to trial, stating that while the tokens themselves are not investment contracts, some transactions may constitute investment contracts. The SEC has filed similar lawsuits against other major crypto exchanges, including Binance and Coinbase, accusing these companies of registration violations.
Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia issued an opinion dismissing several of the SEC's claims against Binance. According to a July post on Binance's website, Jackson dismissed claims that crypto tokens are investment contracts and that Binance's stablecoin BUSD is an investment contract. She also dismissed claims regarding secondary sales of Binance's token BNB being securities transactions but allowed several other SEC claims to proceed. "This decision is a positive step towards safeguarding the integrity of the crypto market and calls for fair and consistent regulation so as not to stifle growth and innovation," Binance said in their post.
Last year, Santori testified before two subcommittees: one from the U.S. House Financial Services Committee on Digital Assets, Financial Technology, and Inclusion; and another from the U.S. House Agriculture Committee on Commodity Markets, Digital Assets, and Rural Development. In his testimony, he spoke about gaps and uncertainties in current regulations and argued that securities laws created in the 1930s do not fit the digital asset industry. "Forcing this technology and a growing global asset class into existing U.S. securities rules without modifications simply does not work," Santori said. He added that he and Kraken "share concerns regarding the domestic and international consequences of this approach as we see other developed economies advancing effective legislation and regulation for digital assets."
Santori joined Kraken in April 2020 after serving as president and chief legal officer at Blockchain.com and as a partner at Cooley LLP.
