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Kraken and U.S. SEC Clash Over Regulatory Charges
The ongoing conflict between the Kraken crypto exchange and the U.S. Securities and Exchange Commission (SEC) continues to intensify with new statements from Kraken.
According to Bloomberg, a recent letter from Kraken, filed earlier this week, accuses the SEC of incorrectly formulating its arguments in the charges. Kraken asserts that the SEC used terms like “investment concept” and “ecosystem” instead of “investment contract” and “enterprise” multiple times in its arguments. The exchange claims that the SEC failed to identify any specific investment contracts that could be sold, brokered, or settled on Kraken.
The SEC previously argued, citing case law, that terminology does not solely determine the type of security, emphasizing that actions are not restricted to obvious and trivial interpretations.
In November 2022, the SEC sued Kraken, alleging it operated without the necessary license. The lawsuit contends that Kraken has been functioning illegally since 2018 as a securities exchange, broker, dealer, and clearing agency, generating hundreds of millions of dollars. Additionally, the SEC claimed that Kraken could mix client funds with its assets, posing potential losses for both parties.
The SEC’s filing seeks to permanently ban Kraken from operating as an unregistered exchange. The regulator also demands that Kraken pay a fine and return part of the funds obtained illegally.
In June 2023, other crypto exchanges, Binance and Coinbase, faced similar lawsuits from the SEC. Like Kraken, both exchanges were accused of violating securities laws.
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