A U.S. District Court judge has rejected Kraken’s use of the “major questions doctrine” as a defense against the Securities and Exchange Commission (SEC), dealing a blow to the crypto exchange’s argument in an ongoing legal battle. The SEC sued Kraken in February 2023, alleging its staking-as-a-service program constituted an unregistered securities offering. Kraken sought to counter the charges by invoking the doctrine, which argues that regulatory agencies cannot decide on major policy issues without clear congressional authorization.
Judge Araceli Martínez-Olguín dismissed the argument, stating that Kraken’s use of the doctrine was “misplaced” and that the SEC’s actions did not meet the threshold of introducing a sweeping new regulatory framework. The judge clarified that the SEC is merely enforcing existing securities laws, which apply to Kraken’s staking program. This ruling bolsters the SEC’s case and sets a precedent for other enforcement actions against similar crypto programs.
Kraken has maintained that its staking program, which allows users to earn rewards for helping secure blockchain networks, does not qualify as a security. The exchange further argued that the SEC’s enforcement approach lacks transparency and violates the principles of fair notice. Despite the setback, Kraken CEO Dave Ripley reaffirmed the company’s commitment to fighting the charges and ensuring clarity for the industry.
This case highlights the intensifying regulatory scrutiny facing the crypto sector as the SEC continues its crackdown on what it deems unregistered securities offerings. With Kraken losing this key defense, other crypto firms offering staking services may now face increased pressure to comply with existing regulations or risk similar enforcement actions. The broader implications of the case could shape how U.S. regulators address innovation and oversight in the rapidly evolving digital asset space.