Crypto exchange Kraken has filed to dismiss a lawsuit brought by the US Securities and Exchange Commission (SEC), calling it a “dangerous precedent” for agency overreach. 

The SEC sued Kraken in November, alleging the firm violated securities laws by acting as an unregistered broker, dealer, exchange and clearing agency. The SEC also accused Kraken of mixing up to $33 billion in customer and corporate funds, and had paid operational expenses directly from bank accounts that hold customer cash.

In a motion filed on Thursday, lawyers for Kraken asked the court to dismiss the lawsuit with prejudice, arguing that the SEC had failed to plausibly allege that any digital asset traded on Kraken could be classified as a security or investment contract.

In a separate blog post, Kraken said that allowing the case to proceed would set a “dangerous precedent” for industry overreach.

“The SEC’s theory is that there can be an investment contract with no contract, no post-sale obligations and no interaction at all between the issuer and the purchaser,” said Kraken in the post. 

Howey has never been applied in this way, and for good reason,” the firm said. “The theory has no limiting principle. It would grant to the SEC boundless authority over commerce and potentially open up the floodgates to private securities law claims.”

Kraken CEO Dave Ripley claimed that the SEC’s actions were politically motivated, highlighting in an X thread how the securities regulator told Kraken it was bringing a lawsuit a day after the firm testified about the SEC’s “overreach in crypto and its flawed regulation-by-enforcement approach to policy making.”

Earlier this month, Kraken paid a $30 million fine to the SEC and agreed to terminate its staking-as-a-service platform for its US-based customers.