Ripple’s CLO Stuart Alderoty Voices Strong Support for Kraken in Legal Battle Against the SEC

Ripple’s CLO Stuart Alderoty Voices Strong Support for Kraken in Legal Battle Against the SEC

Ripple’s Chief Legal Officer (CLO) Stuart Alderoty, has openly defended crypto exchange Kraken as it battles the U.S. Securities and Exchange Commission (SEC) over allegations of securities law violations. This support comes after U.S. District Judge William H. Orrick denied Kraken’s motion to dismiss the SEC lawsuit, ordering the exchange to respond to the complaint within 20 days.

Alderoty’s Take on the Ruling

Following the recent court decision, Alderoty pointed out key aspects of the ruling in the ongoing Kraken vs SEC case, emphasizing that the court reaffirmed the notion that “crypto asset securities” do not exist as a legal category. He described the decision as a significant setback for the SEC, criticizing the regulator’s reliance on a regulation-by-enforcement strategy that hinges on contentious interpretations of the law. “Bad news for the SEC,” Alderoty noted in his remarks.

Kraken’s Response and Legal Strategy

Marco Santori Kraken’s Chief Legal Officer, also commented on the Federal court’s ruling, highlighting that none of the tokens traded on Kraken were deemed securities by the court. Santori noted that the judge described the SEC’s characterization of Kraken’s tokens as “crypto asset securities” as “unclear at best and confusing at worst.”

Santori further criticized the SEC’s litigation tactics, particularly the agency’s insistence that a “written contract” is necessary to classify a security, which the court questioned.

However, the court’s decision to allow the lawsuit to proceed puzzled some. Santori explained that the court drew a distinction similar to that in the Ripple case, where it was determined that while a token itself isn’t a security, the agreements surrounding it could be.

According to Santori, the SEC has lost the argument that “tokens are securities” and will struggle to prove that every transaction on Kraken constitutes a security. He expressed confidence in Kraken’s position, stating that the SEC’s reliance on the Howey Test will fall short, and that Kraken is prepared to demonstrate this during the discovery phase. Santori firmly declared, “Kraken will fight and Kraken will win.” He also noted that Kraken isn’t alone in this fight, as other industry players like Coinbase are also facing similar regulatory pressures from the SEC.

The Broader Implications of the SEC’s Approach

Santori also criticized the SEC’s regulation-by-enforcement approach, warning that it could have far-reaching consequences for the crypto industry. He argued that applying this standard across the crypto industry would be prohibitively costly and time-consuming, given the vast number of transactions involving any given asset. This could result in protracted litigation. Santori reaffirmed that the court’s ruling supports Kraken’s position that the SEC cannot regulate the crypto industry effectively through enforcement actions alone.

As the SEC continues to press its demands, players in the crypto market are also working to align with regulatory expectations. For instance, crypto exchange Binance has been actively expanding its compliance team following its own legal challenges with the SEC over the past year.