It appears that once again, the Securities and Exchange Commission in the US has a major crypto exchange in its sights, as it has filed a lawsuit charging Kraken, the 10th biggest centralized crypto exchange by spot trading volume, with operating as an unregistered securities broker, dealer, exchange and clearing agency, and with commingling customer assets with its own corporate assets.
Chart From CoinGecko 2023 Q3 Crypto Industry Report
The SEC’s complaint makes mention of the Howey Test for determining whether assets are investment contracts and can be regarded as securities, and listed crypto assets that it has determined in previous cases (against Bittrex, Binance, and Coinbase) to be securities, specifically, the SEC mentioned: “Crypto assets trading under the symbols ADA, AXS, ALGO, ATOM, CHZ, COTI, DASH, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, SAND, and SOL.”
Notably, there is no report of Ether (which trades under the ETH symbol), and it has been taken as a positive signal with regard to the various ETH ETF applications that are currently under consideration at the SEC, while it has also long been established that Bitcoin is classified as a commodity.
However, in response to these charges, Kraken has come out in a combative frame of mind and appears unwilling to take the allegations lying down.
Kraken Posts Its Defense
Kraken’s CEO, Dave Ripley, stated, in a quick response to the SEC: “We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position.”
We strongly disagree with the SEC claims, stand firm in our view that we do not list securities, and plan to vigorously defend our position.
As we have seen before, the SEC argues that @krakenfx should “come in and register” with the agency, when there is no clear path to…
— Dave Ripley (@DavidLRipley) November 21, 2023
And, Kraken has published an unambiguous blog post articulating its position, which begins by stating that Kraken denies accusations that it “operates as an unregistered securities exchange, broker, and clearing house”. It intends to contest these accusations in court, and in the meantime, will continue to operate its services as usual.
The post from Kraken stated: “The complaint against Kraken alleges no fraud, no market manipulation, no customer losses due to hacking or compromised security, and no breaches of fiduciary duty. It includes big dollar amounts but does not…
