Thread by @msantoriESQ

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.

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. 1/

2/ Furthermore, the Court found the SEC’s self-serving invention of the “crypto asset security” concept to be “unclear at best and confusing at worst.”

3/ The Court called out the SEC’s straw man tactics, too, wondering aloud and on the record why the SEC consistently mischaracterizes Kraken’s position as requiring a “written contract” for there to be a security.

4/ Yet, the Court still permitted the case to proceed to discovery. How? Read on.

5/ Fundamentally, the Court in Kraken’s case made the same distinction as in the Ripple case: A token isn’t a security, but agreements around a token could be.

6/ The SEC unqualifiedly lost on this “tokens are securities” theory, and will not be permitted to rely on it going forward.

Instead, it will need to prove, for every alleged transaction on Kraken, that the Howey Test factors are satisfied.

They aren’t, and we look forward to proving this in discovery. Kraken will fight and Kraken will win.

7/ But more importantly: Applying this standard across the industry under the SEC’s regulation-by-enforcement approach will require extensive, expensive, and time-consuming discovery for each of the millions (billions?) of transactions in a given asset.

Litigation without end.

9/ Today’s ruling confirms what we’ve been saying all along: the SEC cannot credibly regulate crypto by enforcement.

10/ To deliver clarity to the industry, to protect consumers and foster the growth of blockchain technology, Congress must pass a comprehensive market structure framework.

We applaud all of those in our government working tirelessly to make this a reality and we thank the Court for its consideration of this case.