A California judge has ruled that Kraken must face an SEC lawsuit alleging securities violations. On August 23, U.S. District Judge William H. Orrick determined that the Securities and Exchange Commission’s (SEC) argument regarding crypto-securities was valid. The SEC’s complaint, filed in November 2023, asserts that certain blockchain transactions on Kraken’s platform qualify as investment contracts under the Howey Test.

Judge Orrick found merit in the SEC’s argument, suggesting that cryptocurrencies like Cardano, Polygon, and Solana likely fall under federal securities laws. This ruling comes nearly four months after Kraken filed a motion to dismiss the lawsuit, citing incorrect wording.

The crypto community had previously celebrated Solana’s removal from the SEC’s complaint against Binance, seeing it as a positive outcome for SOL and other altcoins. However, the recent ruling indicates that the SEC’s scrutiny of cryptocurrencies continues.

Crypto stakeholders have criticized the SEC, under Chair Gary Gensler, for what they perceive as a hostile approach toward digital assets. Blockchain service providers argue that the regulator has not provided clear policies and registration guidelines. Gensler and the SEC dismiss these claims, asserting that the digital asset ecosystem needs to comply with existing securities laws.

The SEC has issued lawsuits against several major entities, including Binance, Coinbase, Kraken, and Ripple. Despite some losses, such as the partial loss against Ripple over XRP retail sales, the cases against these crypto giants are proceeding in court. Many in the Web3 community believe that the SEC and other federal agencies are enforcing “Operation Choke Point 2.0,” a plan allegedly aimed at removing crypto from America’s financial system.

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