The ongoing legal skirmish between Kraken, a well-known cryptocurrency exchange, and the U.S. Securities and Exchange Commission (SEC) escalates as Kraken launches new arguments against the regulator's lawsuit, alleging inaccuracies in the wording used.

According to recent reports from Bloomberg, Kraken has lodged a letter this week, accusing the SEC of misstating its arguments in the charges brought against the exchange.

Kraken asserts that the SEC's consistent use of terms such as investment "concept" and "ecosystem" is incorrect, as the accurate terminology should be "investment contract" and "enterprise." The exchange argues that the regulator's claims fail to identify any investment contracts tradable on its platform. In response, the SEC has emphasized that legal determinations are not solely reliant on specific terms but also encompass broader actions, as per established case law principles.

The legal dispute dates back to November when the SEC initiated a lawsuit against Kraken, alleging that the exchange operated without proper licensing. The lawsuit contends that Kraken unlawfully functioned as a securities exchange, broker, dealer, and clearing agency since 2018, accruing substantial revenues. Additionally, the SEC expressed concerns about potential commingling of client funds with Kraken's assets, potentially exposing both parties to financial risks. The SEC's legal action seeks a permanent injunction against Kraken's unregistered exchange activities, alongside penalties and restitution for unlawfully obtained funds.

This legal confrontation mirrors similar SEC crackdowns on major cryptocurrency exchanges like Binance and Coinbase in June 2023. Both exchanges faced accusations of violating securities laws, reflecting the regulatory hurdles encountered by Kraken.

As the legal battle continues, Kraken's assertions regarding the SEC's wording highlight the nuanced complexities surrounding regulatory compliance within the cryptocurrency space, with potential implications for industry participants and legal precedents moving forward.