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Kraken Responds To SEC Securities Accusations
Sep 20, 2024
Image: Freepik/PiggyBank
In what is becoming a protracted legal battle, Kraken has responded to the US Securities and Exchange Commission’s assertions that the exchange is violating securities laws.
The SEC has claimed that Cardano, Algorand, and a host of other assets on the Kraken exchange have securities status, meaning that Kraken is training unregistered securities. They have also claimed this means that the exchange has failed to meet the reporting requirements that are levelled at such exchanges.
Kraken has recently reiterated its position that crypto assets do not qualify as securities and, therefore, the SEC has no jurisdiction over them or other exchanges, as the case is now being heard.
Cryptocurrency As A Payment Method
Cryptocurrency is used for peer-to-peer payments, cross-border payments, and ecommerce payments.
It has also become popular with some of the top casino apps in CA as it offers anonymous, private, secure payments at a fraction of the cost and speed of traditional payments. Sports betting and slots writer Jamie Wright claims that payments and withdrawals can be completed in a matter of seconds.
Cryptocurrencies As Securities
However, as well as being used for payments and purchases, crypto is also often seen as a form of investment. High volatility in the market means there is considerable risk, but this also means there is huge potential profit.
And speculators have made vast sums by buying into the likes of Bitcoin, Ethereum, and other cryptos. Ever since Bitcoin launched, and especially since it has gained more widespread adoption, governments and government agencies around the world have struggled with how to classify crypto and whether to regulate these digital assets.
Regulation
On the one hand, regulation would offer buyers protection against the collapse of exchanges, and put other security measures in place for users.
Crypto proponents point to cryptocurrency’s decentralized nature and its privacy, claiming that regulation would diminish these benefits. The disagreement has firmly pitted crypto exchanges and the SEC against one another.
Kraken Takes On The SEC
In May 2023, crypto exchange Kraken faced the House Financial Services Committee and the House Agriculture Committee and, in doing so, they said that more robust regulations would help protect investors.
However, they also argued that the SEC was overstepping its jurisdiction and that, in any new regulations, the SEC should be overlooked in favour of other regulators.
The SEC’s Retaliation
The day after the hearing, the SEC filed a lawsuit against Kraken accusing them of trading unregulated securities. There was much debate over the filing. Kraken argued that there was no contract and that the tokens available on their exchange did not constitute securities.
The SEC argued that the tokens are “digital asset securities”: a term they themselves coined. At the time of the filing, Kraken stated that the SEC contradicted its own definitions of securities and went against generally accepted definitions and regulations.
The Court Case
Last week, Kraken requested that the case against them be heard in a US court and that they be given a jury verdict. This follows a decision by a California judge, last month, that the case would go ahead.
The SEC has claimed that ADA, ALGO, ATOM, FIL, FLOW, ICP, MANA, MATIC, NEAR, OMG, and SOL all qualify as securities. They state that Kraken has failed to properly register as a broker or exchange, and they have requested that the exchange pay a portion of the profits it has made in fines.
Interestingly, the filing only relates to the 11 tokens listed and does not include BTC or ETH, which the SEC has previously claimed do not qualify as securities, despite their similarities to other tokens.
The Implications
The SEC has also filed similar cases against Coinbase and Binance, and judges have recently also ruled that these cases will also proceed to court. The outcome of these cases could have significant implications on the cryptocurrency market, at least in the US and for anybody who uses US exchanges.
If it is determined that Kraken, Coinbase, and Binance have indeed acted as securities exchanges, it will mean they will have to report data to the SEC and will have to meet regulatory requirements that could see their exchange offerings change considerably.
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