Kraken has rejected the Securities and Exchange Commission's (SEC) allegations that its platform listed securities, stating that the SEC's arguments aim to reshape the US financial system beyond its regulatory boundaries, as per a court filing on May 9.

Kraken clarified that the SEC couldn't identify tradable investment contracts on its platform. Instead, the commission, led by Gary Gensler, was substituting terms like investment "concept" and "ecosystem" for "investment contract" and "enterprise."

According to Kraken's lawyers, the platform doesn't trade, broker, or settle "concepts" or "ecosystems." They emphasized that the SEC didn't plainly assert that what is traded on Kraken is itself an investment contract, highlighting a fundamental flaw in the SEC's case.

Additionally, Kraken argued that the SEC's actions could lead to a significant restructuring of the US financial regulatory framework and should be discussed in Congress rather than the courts.

Kraken's legal battle is part of several lawsuits where the SEC is challenging the definition of securities. The SEC contends that many digital assets meet the definition of securities under the Howey Test. They referenced a recent court ruling rejecting Coinbase's argument about its operations not violating federal securities law as evidence that the digital asset sectors are within the framework used to identify securities for decades.