The ongoing legal battle between the Kraken crypto exchange and the U.S. Securities and Exchange Commission (SEC) continues to intensify, with Kraken filing a new letter earlier this week accusing the regulator of incorrectly formulating its arguments in the charges against the platform.

According to a report by Bloomberg, Kraken claims that the SEC used the terms "investment concept" and "ecosystem" instead of the legally recognized terms "investment contract" and "enterprise" several times in its arguments.

Kraken argues that the SEC's incorrect wording is significant because the regulator could not identify any investment contracts that could be sold, brokered, or settled on the Kraken platform, which is a crucial element in determining whether securities laws were violated.

The exchange's latest filing is a continuation of its efforts to have the SEC's lawsuit against it dismissed. In November 2023, the SEC sued Kraken, alleging that it had been operating illegally since 2018 as an unregistered securities exchange, broker, dealer, and clearing agency, earning hundreds of millions of dollars in the process.

The lawsuit also claimed that Kraken had been mixing its clients' funds with its own assets, potentially leading to losses on both sides.

In response, the SEC's filing asked that Kraken be permanently banned from operating as an unregistered exchange and ordered to pay a fine and return a portion of the funds obtained illegally.

Kraken's argument about the SEC's incorrect wording is not without precedent. The regulator has previously acknowledged, citing case law, that words themselves do not determine the type of security since actions are not limited to the obvious and trivial.

The legal battle between Kraken and the SEC is part of a broader crackdown by the regulator on the cryptocurrency industry. In June 2023, the SEC filed similar lawsuits against the crypto exchanges Binance and Coinbase, accusing them of violating securities laws.

The outcome of these lawsuits will have far-reaching implications for the cryptocurrency industry, as it will set precedents for how regulators view and classify various digital assets and trading platforms.